AVON — Magellan Health Services Inc. announced Tuesday it is moving its headquarters in the next few months from Avon to Scottsdale, Ariz.
The change follows a shift in leadership to a chairman and CEO who lives in a Scottsdale suburb. The company also has a growing presence in Arizona following its acquisition last fall of Partners Rx. Both were reasons for the move, the company said.
Barry Smith, who lives in Paradise Valley, Ariz., became CEO of Magellan Health on Jan. 1, 2013, succeeding René Lerer. Lerer stayed on as chairman until the end of last year. Smith and other executive positions will be moved from Connecticut to the Grand Canyon state.
Magellan Health completed its $100 million acquisition in October of Partners Rx, a pharmacy-benefits management company based in Scottsdale, Ariz. Partners Rx was founded in 2001 and had an estimated annual revenue of $240 million last year.
“While we are opening a small executive office in Scottsdale, moving the headquarters from Connecticut to Arizona has no day-to-day impact on the company,” company spokeswoman Colleen Johnson wrote via e-mail.
Magellan Health was incorporated in 1969 and has been headquartered in Connecticut since 2004 — first in Farmington and then in Avon. Its current headquarters are 55 Nod Road, Avon. Before moving to Connecticut, the company was headquartered in Maryland. Magellan Health was in bankruptcy in 2003. When it emerged from bankruptcy, a new management team relocated the company to Connecticut.
Magellan Health has grown in recent years through acquisitions. The company had $3.55 billion in net revenues and 5,900 employees last year compared with $3.2 billion in net revenues and 5,000 employees in 2012.
Jon Rubin, the chief financial officer, has chosen not to relocate and will be leaving the company. He will remain with Magellan for up to a year until Magellan Health recruits a new CFO.
The company employs roughly 80 people in Connecticut, and “except for a few executive positions which will be based in Arizona, we expect to maintain a strong presence (and our physical office location in Avon) in Connecticut,” Johnson wrote in an e-mail.
There is no tax advantage, “either by moving the headquarters to Scottsdale or keeping it here in Avon,” Johnson said.
The company announced Tuesday that it plans to close on another acquisition Wednesday, of CDMI LLC, in a transaction that will cost at least $205 million and as much as $370 million, the largest purchase in company history.
“It has been an exciting quarter for our pharmacy business, with the announcement of a new acquisition,” said Barry M. Smith, chairman and chief executive officer of Magellan Health Services.
“The acquisition of CDMI demonstrates Magellan’s continued execution on our strategy to create a robust pharmaceutical operation that will drive future profitable growth,” Smith said in a statement. “CDMI will enhance our capabilities and customer relationships, as we strengthen our total drug offering, managing any drug, under any benefit, at any site of service.”
Magellan Health announced its move as it released first-quarter earnings Tuesday morning.
Net income was $25.7 million for the quarter, or 92 cents per share, compared with $28.1 million, or $1.01 per share, during the same period in 2013.
The company said net income “decreased mainly due to higher depreciation and amortization resulting from asset additions after the prior year quarter and acquisition activity, and a higher effective tax rate as a result of non-deductibility of health insurance fees, offset by higher segment profit.”
Net revenue increased to $966.48 million for the quarter, compared with $821.76 million during the same period in 2013.
As of March 31, the company had $291.8 million in unrestricted cash and investments. As of last week, Magellan Health had repurchased 470,000 company shares for a total of $27.3 million this year. The company is less than half way through its current plan to spend $300 million repurchasing shares.
Rubin, the chief financial officer, said in a statement: “Relative to 2014, we are updating our guidance to reflect the impact of the CDMI acquisition as well as share repurchase activity. Our full year 2014 expectations are for revenue of $3.6 billion to $3.8 billion, net income of $53 million to $69 million, and segment profit of $238 million to $258 million.”
Magellan Health’s stock closed at $57.51, up $2.15 Tuesday on the New York Stock Exchange.