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Aetna defends bid rejection
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March 13, 2000: 11:52 a.m. ET
Health insurers' stock drops after news of $10B bid rejection, spin off
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NEW YORK (CNNfn) - Health insurer Aetna Inc. defended its rejection of an estimated $10 billion buyout offer from WellPoint Health Networks Inc. and ING America Insurance on Monday, saying that the company is worth much more than the offering price.
Aetna, the largest U.S. health insurer, said in a conference call with Wall Street analysts that in addition to the price, it saw integration problems with the proposed acquisition and anticipated that such a deal would run into regulatory problems.
In rejecting the unsolicited offer, the ailing Hartford, Conn.-based company announced plans over the weekend to split itself into two public companies: one focused on health care, the other on financial services. The company said the plan would increase shareholder value by improving ties to hospitals and doctors and enhancing life insurance, pensions, mutual funds and other financial service offerings.
CEO William Donaldson, who was appointed late last month after former chief executive Richard Huber resigned under pressure, told analysts that the company seriously intends to pursue the spin-off plan, saying that the rejection of the takeover bid "was not a ploy to get a better offer."
"We don't want somebody else to do what we think we can do for ourselves," Donaldson said. "Having said that, we will always be open to any legitimate offer of interest."
Aetna (AET: Research, Estimates) shares slid as much as 9, or 16 percent, to 47 at the beginning of trading Monday as Aetna's announcement received a chilly reception from Wall Street. Shares rose to as high as 58 earlier this month on speculation of a takeover, after falling to an eight-year low of 38-1/2 just prior to Huber's resignation.
Under the proposed buyout, California-based health insurer WellPoint (WLP: Research, Estimates) and ING offered to acquire Aetna for $44 in cash and $26 in WellPoint common stock in a deal that would have left WellPoint with the health business and ING, a unit of Dutch bank-insurer Internationale Nederlanden Groep, with the financial services operations.
But Donaldson said the buyout offer was inadequate and that he would take responsibility for efforts to boost the company's stock price.
"I totally accept accountability for the performance at this company," said Donaldson, co-founder of investment banker Donaldson, Lufkin & Jenrette and a long-time Aetna board member. "This company is worth more than $70" per share.
Donaldson told analysts that the company planned to reap $4 billion from sales of non-core assets outside of the United States as part of its plan to raise its share price.
Meanwhile in Amsterdam, ING said it was keeping its options open.
"ING continues to believe that its proposed outline in its letter would represent outstanding value for Aetna shareholders and is interested to see how the market responds to the decline of its proposal," a company spokeswoman told the Reuters news agency, reading from a statement.
She declined to say if this meant ING would pursue a hostile takeover of the firm, saying only: "ING does not usually opt for a hostile bid."
ING shares dropped 2.2 percent to 49.09 euros on the Amsterdam exchange.
Wellpoint stock rose 1-3/4 to 60-7/16 in morning trading in New York.
--From staff and wire reports 
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Aetna
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