A Medical Device Daily Staff Report
WellPoint (Indianapolis) and Amerigroup (Virginia Beach, Virginia) have entered into a definitive agreement through which WellPoint will acquire Amerigroup, a managed care company focused on meeting the healthcare needs of financially vulnerable Americans, for about $4.9 billion.
WellPoint will pay $92 per share in cash to acquire all of the outstanding shares of Amerigroup.
This combination brings together two premier organizations with a common goal of creating better healthcare quality at more affordable prices for their customers. The acquisition also advances the companies' capabilities to more effectively and efficiently serve the growing Medicaid population, including the expanding dual eligible, seniors and persons with disabilities (SPD), and long-term services and support markets (LTSS).
"We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees. 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," said Angela Braly, chair, president/CEO of WellPoint. "Amerigroup has an excellent management team, a history of disciplined membership growth, and a proven track record in working with state and federal governments and the provider community to improve healthcare costs and quality for its customers. I am delighted to have not only Jim Carlson's continued leadership, but also other members of Amerigroup's senior team to help lead these efforts at WellPoint."
States are looking increasingly to managed care as a solution to more effectively operate their Medicaid programs because of the increasing evidence of its value proposition.
Additionally, the dual eligible, Medicaid SPD and LTSS markets present significant opportunities to help improve value in the entire Medicaid system, especially for people who are dealing with chronic or highly acute medical conditions. Amerigroup's deep experience and LTSS programs combined with WellPoint's CareMore subsidiary's services and care management model for chronically ill and frail members, enhances the ability to improve the quality of care for these members while holding down cost increases.
Upon completion, WellPoint, with its affiliated Medicaid plans, will serve more than four-and-a-half million beneficiaries of state sponsored healthcare programs. The combined company's Medicaid footprint will include 19 states. The company will also have a presence in 13 states with significant near-term dual eligible managed care opportunities, including a presence in the four largest states that have a combined $105 billion in annual dual eligible spending.
WellPoint, has about 96 million people in its health plans and Amerigroup currently serves about 2.7 million members in 13 states.
The acquisition is expected to close in 1Q13.
The transaction is expected to be accretive to WellPoint's earnings per share in 2013, including one-time transaction and integration costs. Accretion is expected to increase in 2014 and exceed $1 per share by 2015, inclusive of the build out costs associated with the expanding dual eligible and reform-driven Medicaid opportunities. WellPoint is not changing its 2012 EPS guidance for this transaction.
"The acquisition of Amerigroup expands our scale and further diversifies our business mix by deepening our investment in the high growth Medicaid marketplace. It also increases our flexibility to serve customers across the economic spectrum," said Wayne DeVeydt, executive VP/CFO of WellPoint. "We believe the acquisition is not only strategically important, significantly enhancing our future revenue and EPS growth opportunities, but will also provide an attractive return for our shareholders."
The deal comes just a week and a half after the U.S. Supreme Court upheld President Barack Obama's healthcare law, which aims to extend coverage to more than 30 million uninsured Americans. Sources familiar with the deal said the high court decision helped serve as a catalyst to negotiations that took place over several months, according to a report from Reuters .
WellPoint's financial advisor is Credit Suisse and its legal advisor is Linklaters. Goldman Sachs & Co. and Barclays are acting as financial advisors to Amerigroup, and its legal advisor is Skadden, Arps, Slate, Meagher & Flom.