AETNA: Stocks Drop After Takeover Rejection
Aetna Inc. stocks were "pummeled" yesterday, as investors conveyed their discontent with the company's plan to split into two parts rather than pursue takeover talks, the Wall Street Journal reports. After company officials announced their plan to separate financial-services and health care businesses Sunday night, stock prices fell 9.4% to $50.75 Monday. Shareholders questioned Aetna's rejection of a $70-per-share takeover bid by WellPoint Health Networks and ING America Insurance Holding Inc. Aetna Chair William Donaldson said that besides creating two separate companies, Aetna officials are planning to sell $1.5 billion of their international operations (Stern, 3/14). Particularly vulnerable are Aetna's Medicare HMOs, which have proved unprofitable (Freudenheim, New York Times, 3/14). Donaldson said, "Everything is on the table. Yes, I could see exiting certain markets. And Medicare is the most suspect" (Stern, Wall Street Journal, 3/14). To bolster its health care business, Donaldson noted that the insurer is considering dropping its "all or nothing" clause that forces doctors to treat Aetna's HMO patients or no Aetna patients at all. He also suggested that the company may shift some HMO patients to the less restrictive PPO plan ( AP/Florida Times-Union, 3/14).
On the Defensive
Defending the decision to dismiss the WellPoint offer, Donaldson said, "We are following the course we announced. We can do for these assets what anyone interested in them can do, and we can do it better" (Bloomberg News/Boston Globe, 3/14). While he dismissed the bid as being "totally inadequate," WellPoint officials called the rejection "disappointing," and indicated that they would not pursue the idea further (Bernstein, Los Angeles Times, 3/14). Hoping to placate shareholders, Donaldson said that the rejection was "not a ploy to get a better offer. We're always open to any legitimate expressions of interest and will evaluate them" (Levick/Gosselin, Hartford Courant, 3/14).