|
WellPoint, ING eye Aetna
|
 |
March 1, 2000: 4:49 p.m. ET
Insurer, Dutch financial giant mull joint $10B cash and stock for ailing Aetna
|
NEW YORK (CNNfn) - WellPoint Health Networks Inc. and ING America Insurance Holdings Inc. have approached Aetna Inc. about a purchase that would value the nation's largest publicly traded health insurer at roughly $10 billion in cash and stock, the companies said Wednesday.
WellPoint and ING sent a letter dated Feb. 24 to Aetna (AET: Research, Estimates) that proposed talks based on an offer of about $70 a share -- $44 of which is in cash and $26 in WellPoint stock. The prospective bidders set a condition of inspecting Aetna's books, among other things, before they make a concrete offer.
Analysts said ING America, a unit of Dutch financial services powerhouse ING, is more interested in Aetna's financial services business, which makes up about 20 percent of Aetna revenue. WellPoint is seeking the 80-percent chunk that is Aetna's bread-and-butter health-care business, they said.
Aetna's stock has been in a slump over the last year, and analysts have faulted management miscues. On Friday, just a day after the letter, Chief Executive Officer Richard Huber resigned, replaced by Donaldson Lufkin & Jenrette co-founder William Donaldson. In January, Aetna announced a new corporate structure to help stem a further market slide.
Ahead of its statement Wednesday, shares of Hartford-based Aetna rose 11-7/8, or 29 percent, to 53, amid reports about an offer. WellPoint (WLP: Research, Estimates), of Thousand Oaks, Calif., sank 5-5/8 to 61-7/8.
The American depositary receipts of Dutch financial services heavyweight ING Groep NV (ING: Research, Estimates), which is the parent company of ING America Insurance, rose 1/4 to 51-13/16.
A deal between WellPoint and Aetna for the insurance business would be a watershed for the industry, which overall has been struggling in recent years. Only WellPoint and United HealthGroup (UNH: Research, Estimates) have been consistently profitable over the last decade.
Todd Richter, an analyst at BofA Montgomery Securities, who has a 'buy' rating on WellPoint shares and a 'neutral' rating on Aetna, said WellPoint has been a disciplined, benefits-oriented insurer that has well executed buyouts. Aetna, on the other hand, has recently behaved like "an 800-pound gorilla that got aggressive with hospitals and doctors," Richter added.
WellPoint has been a selective buyer. Among its deals over the past few years, it purchased the group health businesses of John Hancock Mutual Life and Massachusetts Mutual Life. On Wednesday, WellPoint announced it would buy Rush Prudential Health Plans of Illinois for about $200 million.
"This is such a big deal relative to anything WellPoint has done, and they're so cautious, it's surprising," Joseph France, an analyst with CS First Boston, told Reuters.
Aetna, which previously had announced plans to review its strategy and finding ways of improving the share price, said in a statement that its board of directors would review the letter "in due course."
"It was just ripe, there had been so many discussions," David Shove, a managed care analyst with Prudential Securities, said in an interview with CNNfn. "Mr. Donaldson is clearly shareholder focused and it doesn't surprise me that somebody decided to step in at least and take a whack at it."
Richter said WellPoint may not be the only prospective buyer for Aetna's health care business: "I have to believe that anybody and everybody in the industry of any size would be interested ... including Cigna (CI: Research, Estimates) and United."
For the twelve month period ending in September last year, WellPoint had revenue of $7.2 billion - or less than 30 percent of Aetna's $24.3 billion in sales over the same period.
WellPoint serves about 7.3 million medical members, but through its networks with Blue Cross of California in California and UNICARE, treats more than 32 million "specialty" members in all. Aetna, whose history as one of the titans of U.S. health insurance dates back to the mid-1800s, has some 47 million members worldwide.
WellPoint has a market value of about $3.9 billion - even after Wednesday's dip. Aetna's market capitalization session is about $7.9 billion.
WellPoint declined to comment. A spokesman for ING Groep, the Dutch parent company of ING Health America, could not be reached Wednesday. 
|
|
|
|
|
 |
|
