WellPoint, the US health insurer, will acquire rival Amerigroup Corporation in a $4.9bn cash acquisition, marking the first deal since the US Supreme Court upheld the Obama administration’s healthcare law.
WellPoint will pay $92 a share for Amerigroup, representing a 43 per cent premium above the company’s closing share price last Friday. The move will help WellPoint serve the growing population of poor and elderly people in the US on government-sponsored Medicare and Medicaid programmes.
“We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees,” Angela Braly, WellPoint’s chief executive said. “This is an opportunity to capitalise 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.”
The combined company will serve 4.5m people who are on state-sponsored health plans.
Stock prices of Medicare insurers got a lift earlier this month when the Supreme Court upheld the law, raising the prospect that more poor people would have access to health insurance. Analysts have suggested that the elimination of uncertainty surrounding the law would lead to more mergers, as insurers look for greater scale.
The WellPoint deal is expected to close in the first quarter of 2013.
WellPoint shares fell 2.19 per cent to $59.91 in pre-market trading on Monday. Shares of Amerigroup declined 0.28 per cent to $64.34.
Credit Suisse advised WellPoint and Goldman Sachs and Barclays advised Amerigroup.