Health Net Inc. announced Thursday that it will be acquired by Centene Corp. in a cash and stock deal valued at $6.8 billion.

In a joint announcement, the companies said the combined entity would have about 10 million policyholders and annual revenue of $37 billion. Health Net in Woodland Hills will provide geographic expansion into the California and Arizona markets, while Centene in St. Louis has a large presence in the government programs of Medicare and Medicaid.

Health Net is the fifth largest public company in the greater Valley, based on the Business Journal’s annual list published Monday.

The combined company will be headquartered in St. Louis. The companies expect annual savings of $150 million by combining administrative and information technology functions.

Under the acquisition agreement, Health Net shareholders will receive 0.622 shares of Centene stock and $28.25 in cash for each share of Health Net stock. The payment represents a 21 percent premium over Health Net's closing stock price on July 1. After the transaction, Centene shareholders would own 71 percent of the combined company and Health Net shareholders would own 29 percent.

Jay Gellert, Health Net’s chief executive, said the two companies complement each other.

“After closing, we will be a leading provider of managed health care services very much aligned with the future,” he said in a statement.

In a separate announcement, Cognizant Technologies Inc., the company that has a seven-year master agreement with Health Net to handle its IT function, said if the acquisition is complete it expects the agreement will be canceled. Cognizant would lose about $100 in revenues this year from the cancellation, but anticipates other lines of business would compensate for the loss.

In mid-day trading, shares were $7.03 or 10.8 percent to $73.09 on the New York Stock Exchange.