July 9, 2012

Anthem parent buying Amerigroup for about $4.46B

WellPoint Inc., parent of Hamden's Anthem Blue Cross of Connecticut, will spend about $4.46 billion for Medicaid coverage provider Amerigroup Corp. in a deal that more than doubles the health insurer's enrollment in a market segment poised for expansion, The Associated Press reports.

WellPoint, the nation's second-largest insurer based in Indianapolis, said Monday that it will pay $92 in cash for each share of Virginia Beach, Va.-based Amerigroup, which runs Medicaid coverage in 13 states, including Texas, Florida and New York. That price represents a 43 percent premium to Amerigroup's closing price Friday of $64.34.

Amerigroup shares soared close to the acquisition price Monday morning. They climbed 38 percent, or $24.41, to $88.75. WellPoint's stock rose 3.5 percent, or $2.10, to $62.01 per share.

Medicaid is the state and federally funded program that provides health coverage for the needy and disabled. WellPoint, which is based in Indianapolis, and other insurers see growth opportunities in managing care for patients who qualify for both Medicaid and Medicare, the federally funded program for people over age 65 and the disabled.

These so-called "dual eligible" patients generate a lot of medical claims, and states have been moving them to managed care programs to improve their coverage and cut down on wasteful spending and duplicate tests.

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.

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.

WellPoint runs Blue Cross-Blue Shield plans in several states and has about 33.7 million people enrolled in its plans.

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