WellPoint Nearing Deal To Acquire N.Y.-Based WellChoice
WellPoint is "near a deal" to purchase WellChoice, the largest health insurer in New York state, for about $6.5 billion in cash and stock, the New York Times reports. According to the Times, talks between the two companies began last month when WellPoint made an unsolicited bid of $73 per share for WellChoice.
Executives close to the negotiation said that talks have been ongoing since then. Under the deal being discussed on Monday, WellPoint would pay about $77 per share in cash and stock for WellChoice, representing a 9.1% premium on WellChoice's closing price of $70.60. The executives said talks between the two insurers were "at a particularly delicate stage" on Monday and "could still collapse," the Times reports. As of Monday, it was "unclear" whether the New York Public Asset Fund, which currently owns about 60% of WellChoice's shares, would continue to hold a stake in the combined company, according to the Times.
If a deal is reached, the fund would receive about $4 billion, all of which would go to pay the salaries of members of health workers union 1199/SEIU. The executives said they hope to announce an agreement as early as Tuesday. According to the Times, a deal would give WellPoint, which already is the nation's largest health insurer with 28 million members, "an expanded foothold in the Northeast." WellChoice is the parent company of Empire Blue Cross Blue Shield, which has five million members.
The combination of the two insurers "would make sense strategically for both companies because of synergy between WellPoint's CT Blue plan and WellChoice's New York Plan," Charles Boorady, an analyst at Citigroup, said. He added that a deal would allow both companies to lower prescription drug spending by moving WellChoice's members onto WellPoint's" in-house pharmacy benefit manager. Representatives of WellPoint and WellChoice could not be reached for comment (Sorkin/Freudenheim, New York Times, 9/27).