WELLPOINT: To Buy Georgia Blue Cross’ Parent Company
WellPoint Health Networks Inc., the parent company of Blue Cross of California, "said Thursday that it will buy Cerulean Cos., Georgia's largest health insurer, for about $500 million in stock and cash," Bloomberg News/Los Angeles Times reports. Cerulean, the parent company of Blue Cross and Blue Shield of Georgia, is in the process of converting from a nonprofit organization to a for-profit company. The Cerulean acquisition will add 1.7 million members to Wellpoint's 6.7 million members, two-thirds of which are in California and 100,000 in Georgia (7/10).
A Good Fit
"This is really a fantastic strategic fit," said Leonard Schaeffer, WellPoint's CEO. The acquisition "would be the largest for WellPoint and its first of another Blue-branded plan." The Wall Street Journal notes that Cerulean has a large traditional fee-for-service insurance business, which the California company hopes to convert into more "managed care products" (Rundle, 7/10). Kevin Holt, an analyst with Strong Capital Management, said, "Georgia is only 14% held by managed care, which means there's lots of potential" (Bloomberg/Los Angeles Times, 7/10). The Wall Street Journal notes that WellPoint's 1997 revenue was $5.8 billion, compared to Cerulean's $806 million. Both companies expect the transaction to be completed by the end of the year, though completion "is contingent on court approval of a proposed settlement of litigation that arose out of" Cerulean's for-profit conversion (7/10).