AETNA: Insurer Receives $10B Buyout Offer
Aetna Inc. yesterday confirmed that it received an unsolicited $10.5 billion joint takeover offer by Thousand Oaks, Calif.-based WellPoint Health Networks Inc. and ING American Insurance Holdings. Inc., a subsidiary of Dutch financial company ING Group NV, the Wall Street Journal reports. The offer was received on Feb. 24, one day before William Donaldson was named Aetna's new CEO, replacing Richard Huber. Aetna released a statement yesterday stating that the company would review the bid "in due course," adding that Donaldson currently is conducting "a comprehensive review of the company's strategy and operations." In separate statements, ING said the offer is "very attractive for the shareholders of all three companies." WellPoint Chair and CEO Leonard Schaeffer said his company was looking for opportunities to "enhance value of customers and stockholders" (Gentry/Rundle, 3/2). The bid would provide Aetna shareholders $70 per share, comprising $44 a share in cash and $26 a share in WellPoint stock (Philadelphia Inquirer, 3/2). If the deal is completed, WellPoint would nearly triple its 7.3 million membership, creating a "health care giant responsible for 28.3 million Americans," making it the largest insurer in the country (Peltz, Los Angeles Times, 3/2).
Let the Bidding Begin?
While WellPoint is much smaller, industry analysts say the bid comes at a time when Aetna is particularly vulnerable; struggling financially and facing a series of class action lawsuits challenging "fundamental managed care policies." Todd Richter, an analyst with Banc of America Securities said that WellPoint has "an extremely deep and solid management team that could go a long way in solving Aetna's problems." Following the offer, some analysts indicated that other companies may enter a bidding war over Aetna. One analyst said that WellPoint's offer "clearly puts [Aetna] in play whether they like it or not" (Freudenheim, New York Times, 3/2).
Too Much Clout?
The offer also drew criticism from many concerned about the creation of a huge insurer, arguing that consumers would have limited choices. Thomas Reardon, president of the American Medical Association, said the merger would give the company "the clout to send out contracts with egregious terms and a take-it-or-leave-it attitude." Consumer rights advocate Jamie Court added that the combined company would "be able to dictate terms to doctors, patients, hospitals and nurses with grave consequences for the quality of care." However, some industry analysts suggested that the insurer's greater bargaining power could lead to lower premiums for consumers (Hilzenrath, Washington Post, 3/2).