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MGLN > SEC Filings for MGLN > Form 8-K on 31-Dec-2013All Recent SEC Filings




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Item 8.01. Other Matters

On December 31, 2013, Magellan Health Services, Inc. (the "Company") closed the previously-announced stock purchase agreement (the "Stock Purchase Agreement") under which it agreed to acquire a 65% equity interest in AlphaCare Holdings, Inc. ("AlphaCare Holdings"), the holding company for AlphaCare of New York, Inc. ("AlphaCare"), a Health Maintenance Organization ("HMO") in New York that operates a New York Managed Long-Term Care Plan ("MLTCP") in Bronx, New York, Queens, Kings and Westchester Counties, and Medicare Plans in Bronx, New York, Queens and Kings Counties. The closing followed receipt of approval of the acquisition of control of AlphaCare by the Company by the New York State Department of Health.

AlphaCare began enrolling MLTCP members as of August 1, 2013.

The Company previously held a 7% equity interest in AlphaCare through a previous equity investment of $2 million in preferred membership units of AlphaCare's previous holding company, AlphaCare Holdings, LLC, on May 17, 2013. The Company also previously loaned $6 million to AlphaCare Holdings, LLC. As part of the closing of the Stock Purchase Agreement, AlphaCare Holdings, LLC was reorganized into a Delaware corporation, the preferred membership units and the loan were converted into Series A Participating Preferred Stock ("Series A Preferred") of AlphaCare Holdings and the Company purchased an additional $17.4 million of Series A Preferred.

The parties have also agreed that if AlphaCare requires additional capital in 2014 as it increases its membership, the Company and the other shareholder of AlphaCare Holdings will have the right to subscribe for a pro rata portion of a Series B Preferred Stock of AlphaCare Holdings, the terms and purchase price of which have been agreed upon by the parties. The Company will also have an option to purchase the remaining portion of the AlphaCare Holdings stock at a price determined by an agreed upon formula beginning on January 1, 2017. The minority shareholder of AlphaCare Holdings will also have the right to sell its interest to Magellan or to AlphaCare Holdings beginning on January 1, 2017 at the same agreed upon formula, and will have the additional right, subject to certain operating conditions, to sell 50% of its interest in AlphaCare Holdings to Magellan or AlphaCare Holdings prior to January 1, 2017 at a price determined by a different agreed upon formula.

The Company will also enter into various service agreements with AlphaCare Holdings on prescribed terms and to provide certain clinical and administrative services to AlphaCare.

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