US health insurer WellPoint buys Amerigroup

US health insurer WellPoint is buying Amerigroup, a manager of publicly funded health programs, for about $4.9 billion, the companies said Monday.

The acquisition will position the companies for future growth as they prepare for the launch of insurance exchanges, they said.

The deal comes on the heels of the US Supreme Court's decision in late June to uphold President Barack Obama's health care reform, the Affordable Care Act.

Under the overhaul, states are to have health insurance exchanges, where consumers can shop for coverage, starting in 2014.

WellPoint will pay $92 a share in the all-cash deal for Amerigroup, which specializes in federal and state health care programs such as Medicaid, serving the poor and disadvantaged.

The share price represents a 43 percent premium over Amerigroup's closing price Friday. WellPoint will pay about $4.4 billion for the shares and assume Amerigroup's debt.

"We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees," WellPoint's chief executive Angela Braly said in a statement.

The companies said the combination was aimed at "creating better health care quality at more affordable prices for their customers."

The transaction was expected to close in early 2013.

"Upon completion, WellPoint, with its affiliated Medicaid plans, will serve more than four-and-a-half million beneficiaries of state sponsored health care programs. The combined company's Medicaid footprint will include 19 states," the companies said.

WellPoint, based in Indianapolis, Indiana, has about 96 million people in its health plans.

Amerigroup currently serves about 2.7 million members in 13 states.

Investors applauded the deal in early New York trade. Amerigroup shares soared 37.9 percent to $88.72, while WellPoint climbed nearly 3.0 percent to $61.69.

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Health-care Stocks: Medicaid insurers surge on Amerigroup deal

By Russ Britt, MarketWatch

LOS ANGELES (MarketWatch) — Medicaid insurers surged in early trading Monday, anticipating a reshuffling among health carriers after WellPoint Inc. announced plans to buy Amerigroup Corp. for a 43% premium.

Shares of Amerigroup /quotes/zigman/265070/quotes/nls/agp AGP +38.17%  , a player in Medicaid coverage, were catapulted by 38% after WellPoint /quotes/zigman/362231/quotes/nls/wlp WLP +3.17%  , one of the nation’s biggest insurers, agreed to pay $92 a share for the company, or $4.9 billion. Amerigroup shares were up $24.46 to $88.80 while WellPoint shares were up nearly 3% to $61.50.

Health insurer WellPoint is buying Amerigroup for $4.9 billion, bringing together two major health-care carriers. (Photo: Associated Press)

The news sent shares of other Medicaid insurers soaring, as the market apparently now expects more mergers in the wake of the Supreme Court’s ruling on President Barack Obama’s health-care overhaul bill. The ruling preserved the federal expansion of the Medicaid program for indigent patients, though the court ruled that it’s not mandatory for states to participate.

Fellow Medicaid insurer Centene Corp. /quotes/zigman/292665/quotes/nls/cnc CNC +19.32%  posted a 20% gain to $34.73 on the news. Other Medicaid insurers to bask in the glow were WellCare Health Plans Inc. /quotes/zigman/341770/quotes/nls/wcg WCG +18.47%  , which was up more than 18% to $62.39, while Molina Healthcare Inc. /quotes/zigman/317140/quotes/nls/moh MOH +16.78%  surged by 14% to $26.31.

Analysts said, however, that WellPoint wasn’t reacting to the Supreme Court ruling by making the deal for Amerigroup. The move allows WellPoint to have substantial lines of business in both Medicare and Medicaid.

But the deal will also allow Indianapolis-based WellPoint to benefit from the Medicaid expansion, analyst Chris Rigg of Susquehanna Financial Group said in a morning note to clients.

“There is uncertainty around states’ willingness to participate in the expansion program but if all states opt in, approximately 17 million uninsured lives are expected to be covered through Medicaid expansion,” Rigg wrote. He added that the new company would have a presence in the four largest dual-eligible states, with potential revenue of $100 million.

Deutsche Bank’s Scott Fidel concurred, adding that Amerigroup, headquartered in Virginia Beach, Va., was probably the best-positioned Medicaid player.

“This acquisition significantly enhances WellPoint’s Medicaid franchise providing the company with the best pure-play asset and management team in Medicaid managed care, in our view,” Fidel said in a note to clients.

Russ Britt is the Los Angeles bureau chief for MarketWatch.

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Health insurer WellPoint purchasing Amerigroup for approximately $4.46 billion

INDIANAPOLIS - Health insurer WellPoint Inc. is buying managed care provider Amerigroup Corp. for about $4.46 billion in cash, saying the deal will help it better serve recipients of a gvernmentl healthcare program for the needy and disabled.

Amerigroup manages publicly-funded health programs like Medicaid. It operates in 13 U.S. states, including Texas, Florida, New York and New Jersey.

The combined company will serve Medicaid recipients in 19 states.

Indianapolis-based WellPoint said Monday that it will pay $92 for each Amerigroup share. That's a 43 per cent premium to the company's closing price Friday of $64.34.

Amerigroup currently has about 48.5 million outstanding shares, according to FactSet.

Shares of Amerigroup soared $25.86, or 40.2 per cent, to $90.20 in premarket trading, while WellPoint's stock gained $1.29, or 2.2 per cent, to $61.20.

The companies put the total value of the deal at about $4.9 billion. WellPoint says it will fund the acquisition with available cash, commercial paper and by issuing new debt.

"We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees," WellPoint Chair, President and CEO Angela Braly said in a statement.

Once the buyout is complete, WellPoint and its affiliated Medicaid plans will serve more than 4.5 million beneficiaries of state sponsored health care programs.

It will also have a presence in 13 states with significant numbers of people eligible for managed care under dual government programs, including the four largest states that have a combined $105 billion in annual dual eligible spending.

The transaction is expected to close in 2013's first quarter. It still needs certain regulatory approvals and the approval of Amerigroup stockholders.

The deal is expected to add to WellPoint's 2013 earnings per share and add more than $1 per share by 2015. The company is maintaining its 2012 earnings outlook.

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