Molina Healthcare to buy Unisys unit for $135 million

Molina Healthcare Inc., based in Long Beach, announced Tuesday that it has agreed to buy Unisys Corp.'s health information management unit for $135 million in cash.

The unit of Unisys, which is an information technology services company, designs, develops and implements medical record systems outsourced by state governments to run their Medicaid systems, said J. Mario Molina, Molina Healthcare’s chief executive.

“Every state has a Medicaid system, and Medicaid contracts are big contracts and they don’t come up to often,” Molina said. “This gives us the credibility to bid for a state contract when it comes up and say, ‘We already do this in these states and we can do this in your state, too.’ ”

The health information management unit has Medicaid contracts with the states of Idaho, Louisiana, Maine, New Jersey and West Virginia. In the Florida Medicaid system, the unit handles drug rebate administration services, he said.

Molina Healthcare offers HMO programs in nine states and serves about 1.5 million people. The Unisys unit serves about 2.4 million people, Molina said.

The health information management unit’s annual revenue is about $110 million, with about a 20% profit margin, he said. In 2008, Molina Healthcare reported annual revenue of about $3.1 billion and profit of $62.4 million.

“We wanted to get into the Medicaid business and this is our way in, and it helps us diversify as well,” Molina said. “This is a long-term investment.”

All 900 employees of the Unisys unit will become Molina employees upon the closing of the sale, which should take place before July, Molina said.

As a part of the sale, Unisys has agreed to provide transitional and technology support to Molina Healthcare for up to one year, he said.

Shares in Molina rose 48 cents, or 2.1%, to close at $23.68 on Tuesday.