WellPoint takes up WellChoice
US$6.5B IN CASH AND STOCK
NEW YORK • WellPoint Inc., the largest U.S. health-insurance provider, agreed to buy WellChoice Inc. for about US$6.5billion in cash and stock to reduce costs and expand in the U.S. northeast.
WellPoint will pay US$77.23 in cash and stock for each share of WellChoice, New York’s biggest medical insurer, the companies said yesterday. That’s 9.4% more than New York-based WellChoice’s closing price of US$ 70.60 on Monday.
The purchase will enable WellPoint to compete directly with No. 2 medical insurer UnitedHealth Group Inc.’ s Oxford Health Plans, acquired last year. WellPoint, based in Indianapolis, was formed in November when Anthem Inc. bought WellPoint Health Networks Inc. for US$20.8-billion and took its name.
“ The New York area is a very good market for insurers, with a lot of large companies headquartered there that can use their national coverage,” said Michael Obuchowski, who helps manage US$ 35- million at New York- based Altanes Investments LLC, including shares of health insurance companies.
WellChoice holders will receive US$ 38.25 in cash and 0.5191 share of WellPoint for each WellChoice share, the companies said in yesterday’s statement. The transaction, subject to shareholder and regulatory approvals, is expected to be completed in the first quarter of 2006.
Shares of WellChoice jumped US$4.91, or 6.95%, to close at US$75.51 yesterday in New York Stock Exchange composite trading. The stock had almost doubled in the 12 months before yesterday and tripled since November, 2002. WellPoint rose US8¢ to close at US$ 75.01 after gaining 73% in the year through yesterday.
The New York Public Asset Fund agreed to vote its 52 million WellChoice shares, or 62% of those outstanding, in favour of the transaction, the companies said. The fund will receive US$1.99-billion in cash and 27 million shares of WellPoint, based on yesterday’s closing price, the companies said.
WellChoice owns New York’s Empire Blue Cross Blue Shield and had about five million customers at the end of the second quarter. Trumbull, Conn.-based Oxford had 1.5 million members in the New York metropolitan area when the UnitedHealth acquisition bought it for US$4.6billion in July, 2004.
WellPoint is the largest operator of Blue Cross and Blue Shield health plans, covering one in every three U.S. customers of the programs through operations in 13 states. The company, which has non-Blue Cross plan in other states, said in July that it provided medical insurance for 28.8 million Americans, 16.2 million more than a year earlier, before the Anthem- WellPoint combination.