AETNA: Nixes Takeover Bid, Will Split Instead
Rejecting a $10 billion takeover bid by Wellpoint Health Networks and ING Group, Aetna Inc. announced Sunday that it would split into two companies, one to cover the health care division and another to oversee the company's financial services and international insurance divisions, the Hartford Courant reports. Aetna's board unanimously refused the $70-a-share offer, saying it was "too low and the risk to Aetna's business to high" (Levick, 3/13). By Sunday night, Wellpoint officials had not decided how to respond to Aetna's decision, but one source said, "They unanimously rejected our invitation. They made themselves pretty clear." Aetna Chair and CEO William Donaldson said of the move, "Each of our two core businesses has great potential, and each will be better able to recognize that potential as a separate company." Aetna spokesperson Joyce Oberdorfer said that each company would have its own board of directors and management team, but added that other details of the split had not been worked out yet. How stockholders will be compensated for the change is undecided, but one possibility is that they will be issued shares of both new companies to replace their Aetna shares.
Appeasing Doctors and Patients
In announcing the split, Donaldson acknowledged that Aetna U.S. Healthcare had brought in "disappointing" results, as its stock has steadily declined from $99.88 in May to $38.50 in February. He said the division "needs to improve its relationships with patients and doctors, and make its plans more flexible." Oberdorfer said that Aetna "plans to review its physician contracts and offer insurance plans that are more flexible than the tightly controlled HMO products it now offers" (Bernstein, Los Angeles Times, 3/13). Donaldson said, "We want to lower the rhetoric. We want to work with (doctors), try to be partners in finding solutions." Cost-cutting will be speeded through attrition and more cautious spending, Donaldson said, adding, "I see a shifting of responsibilities and certain amount of shifting of people, but I do not see, at least at this juncture, big-time layoffs." Aetna "is also likely to create a separate company ... to focus on Internet opportunities in its health care business." While the company has been talking to potential partners, Donaldson did not mention specifics (Hartford Courant, 3/13).