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HMOs in merger talks
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September 17, 1996: 10:18 a.m. ET
Foundation Health and Health Systems reportedly discuss teaming up
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NEW YORK (CNNfn) -- Foundation Health Corp. is in merger talks with Health Systems International Inc. in what could create a combined health-maintenance organization with revenues topping $6 billion, a published report said Tuesday.
The Wall Street Journal said that sources close to the situation confirmed that talks are ongoing. Foundation released a statement on Monday confirming speculation that is was weighing options for a merger, but declined to name potential partners.
If the two California-based companies reach an agreement, they would form one of the nation's largest HMOs, serving five million members in California and other states. A deal could be valued at up to $3 billion.
However, analysts said it might be too early to count on a definitive agreement. Similar talks between the two companies in 1994 collapsed. Other discussions have also been unsuccessful.
"They've done deals that haven't worked out," Ray Garea, an analyst with Heine Securities, told CNNfn. "They've done deals that haven't worked out. They've made public statements that haven't turned out to be true. They've lost credibility."
In its statement on Tuesday, Foundation said it is looking to form a "merger of equals." Industry watchers said the only HMO matching such a requirement is Health Systems.
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