CalPERS Opposes Executive Payments in UnitedHealth-PacifiCare Deal
The CalPERS board on Monday voted to oppose a provision in an acquisition plan between UnitedHealth Group and PacifiCare Health Systems that would result in $345 million in payments to 39 PacifiCare executives, the Los Angeles Times reports (Vrana, Los Angeles Times, 10/18).
Minnesota-based UnitedHealth on July 6 announced plans to acquire California-based PacifiCare for $9.2 billion in cash, stock and assumed debt. The acquisition, which requires shareholder and regulatory approval, would provide UnitedHealth with access to the 716,000 PacifiCare members enrolled in Medicare plans and the 2.5 million members enrolled in commercial plans in California, Washington state, Oregon and Nevada (California Healthline, 8/2).
The deal would include $230 million in accelerated stock options and payments to PacifiCare executives and an additional $85 million in signing bonuses to executives who remain employed with the company after the acquisition.
CalPERS board members voted 7-4 to oppose the pay package provision (AP/Contra Costa Times, 10/18). The board also voted to recommend that the Department of Managed Health Care, which must approve the deal, reject the plan unless the payment provision is excluded.
According to the Times, CalPERS is the first institutional investor to take an official position on the proposed acquisition (Los Angeles Times, 10/18). CalPERS owns 423,100 shares of PacifiCare and more than 7.2 million shares of UnitedHealth.
According to the Sacramento Bee, the recommendation came in spite of a report by CalPERS analysts indicating that the merger would increase the companies' stock value by $5 billion (Chan, Sacramento Bee, 10/18)
Shareholders will vote on the proposal on Nov. 17 (Los Angeles Times, 10/18). DMHC and the Department of Insurance are expected to release findings of an ongoing analysis of the merger by the end of the year.
PacifiCare spokesperson Tyler Mason said the company offered stock options to executives it recruited between 2000 and 2002. He said many executives likely will vest their shares this year regardless of the merger because the PacifiCare stock has increased since the executives joined the company (AP/Contra Costa Times, 10/18). "These packages are performance-based and they are options granted at a time the company didn't have the strength to attract top talent," he said (Los Angeles Times, 10/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.