Amerigroup to become WellPoint subsidiary

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Print this page by Robert Powell

Virginia Beach-based Amerigroup Corp. soon will become part of the nation’s second-largest health insurer.

Indianapolis-based WellPoint Inc., the parent company of Anthem Blue Cross and Blue Shield, is acquiring Amerigroup in a $4.9 billion all-cash deal.

Amerigroup, one of four Fortune 500 companies based in Hampton Roads, coordinates services in publicly funded health-care programs in 13 states. WellPoint, the Blue Cross and Blue Shield licensee in 14 states, will pay $92 for each share of Amerigroup stock, which closed at $64.34 a share on the last trading day before the deal was announced in early July.
WellPoint said the acquisition will help the company more effectively serve a growing number of Medicaid patients, including programs for “dual-eligible” (eligible for both Medicaid and Medicare) patients, seniors and persons with disabilities.

Upon completion of the deal, WellPoint, with its affiliated Medicaid plans, will serve more than 4.5 million beneficiaries of state-sponsored health-care programs. It will manage programs in 19 states, which have nearly 60 percent of the nation’s Medicaid enrollment.

“We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees,” Angela F. Braly, chair, president and CEO of WellPoint, said in a statement. “This is an opportunity to capitalize on the strengths of both companies to better serve our members and position our companies for future growth as the health insurance industry changes and as we prepare for health insurance exchanges [being set up in each state in compliance with the federal health-care reform law].”

Braly said Amerigroup has a “proven track record in working with state and federal governments and the provider community to improve health-care costs and quality for its customers.”

In a conference call with stock analysts and reporters, Braly said the deal was not connected to the recent Supreme Court decision upholding the health-care reform law. “We did the deal no matter what” the court ruled, she said, adding that work on the transaction had been going on for months.

Braly said the company expects to see “organic growth” unrelated to the health-care law as an increasing number of states turn to managed-care organizations to handle their Medicaid costs.

Amerigroup will operate as a WellPoint subsidiary and retain its top management, including Jim Carlson, the company’s chairman and CEO; Jim Truess, its executive vice president and chief financial officer; and Richard Zoretic, its executive vice president and chief operating officer.

WellPoint expects the acquisition to close in the first quarter next year. It is subject to approval by state and federal regulators and Amerigroup’s stockholders.  WellPoint will finance the deal with cash on hand, commercial paper and new debt.

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