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 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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Health insurer WellPoint to buy 1-800 Contacts

INDIANAPOLIS (AP) — WellPoint Inc. plans to buy contact lens retailer 1-800-Contacts Inc. in a deal that would give the insurer its first direct-to-consumer business outside selling individual health coverage.

Terms of the deal with private equity firm Fenway Partners were not disclosed.

WellPoint, based in Indianapolis, said Monday that the eyewear company will help diversify its revenue sources with a high-margin business. WellPoint is the second-largest U.S. health insurer based on both revenue and enrollment, trailing only UnitedHealth Group Inc.

It runs Blue Cross Blue Shield plans in 14 states, including California and New York.

Health insurance is WellPoint's main product, and the insurer said in April its total medical membership fell nearly 2 percent to 33.7 million people compared to the end of last year. The company lost enrollment in its two largest membership segments, plans that provide health insurance to employees of small businesses and large, national accounts.

1-800 Contacts fills orders for contact lens by phone, internet, mail or fax. It sells disposable and color lenses among other types. It also offers brands like Acuvue, Focus, FreshLook and PureVision and operates a partnership with Wal-Mart Stores Inc., the world's largest retailer.

It also sells eye glasses through its glasses.com website.

WellPoint Chairwoman and CEO Angela Braly said in a statement that 1-800 Contacts serves about 3.3 million customers, but it comes with a significant growth opportunity because there are more than 38 million people wearing eye contact lenses and more than 140 million people wearing eye glasses in the United States.

The deal requires regulatory approvals and customary closing conditions but is expected to close in the third quarter.

WellPoint said it will be financed with cash on hand, and its 2012 earnings will take a hit of 4 cents per share due to transaction and integration costs.

Its shares finished at $66.36 on Friday. They are up 17 percent from their 52-week low of $56.61 in August. They peaked at $80.90 last July.

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