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ING buying Aetna units
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July 20, 2000: 12:28 p.m. ET
Dutch firm in $7.7B deal for health insurer's financial services, int'l units
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LONDON (CNNfn) - Netherlands-based ING Groep NV won the battle for the troubled U.S. health insurer Aetna Inc.'s financial services and international businesses Thursday, in a deal valued at $7.7 billion in cash and debt.
After on-again, off-again buyout talks, ING agreed to pay $5 billion in cash and will assume $2.7 billion in Aetna debt. The takeover continues the Dutch financial services company's drive to expand in North America, following its $6 billion deal to buy Minnesota-based life insurer ReliaStar Inc. in May.
Aetna will spin off to its shareholders a new health business, which will include the Aetna U.S. Healthcare managed-care business, group insurance and other medical divisions. The health-care company will continue to be called Aetna Inc. and retain corporate headquarters in Hartford, Conn.
The deal came as little surprise to investors and analysts, who had been anticipating the accord for weeks.
"This was pretty much as expected, although ING got a slightly better price than originally thought," said Lewis Phillips, an analyst at brokerage Fox-Pitt Kelton in London. According to some analysts' estimates, the two Aetna divisions were worth as much as $10 billion collectively.
Aetna stock slipped 3/4 to 58-1/4 at midday on the New York Stock Exchange, while ING closed down 2.25 percent to  69.11 in Amsterdam. ING's (ING: Research, Estimates) American depositary receipts lost 15/16 to 64-3/16 in New York.
 ING, beating out competition from as many as five other suitors, had courted Aetna for months.
Aetna ended exclusive talks with the Dutch financial services company in June - a move that many analysts viewed as an attempt to secure an improved bid from the Amsterdam-based company - but the two sides apparently returned to serious negotiations this month. Other potential bidders reportedly included American International Group (AIG: Research, Estimates) and Citigroup Inc. (C: Research, Estimates) of the United States.
The deal will make ING the largest insurer in the United States in terms of life and annuity premiums, and No. 6 in terms of assets. ING said the deal will make it the world's 11th-largest asset manager, up from 19th.
"Our acquisitions of ReliaStar, Aetna Financial Services and Aetna international complete our strategic goal of achieving a top-10 position in the U.S. market," ING Chairman Ewald Kist said.
Aetna (AET: Research, Estimates), the largest U.S. health insurer, has struggled for years to rein in costs of its medical business and to integrate a series of acquisitions. The company decided to split itself in two earlier this year, with one unit focusing on managed health care - which accounts for about 80 percent of the firm's revenues and the other on financial services.
But many shareholders balked at the plan, saying the company wasn't doing enough to boost the value of the sagging stock. Shortly after, Aetna began talks with ING on selling the financial services unit outright.
"With this transaction, we believe we have taken an important step toward our stated goal of delivering value to shareholders," said Aetna Chairman and CEO William H. Donaldson, a long-time board member who took over as the company's leader earlier this year after the ouster of former CEO Richard Huber.
 Earlier this week, the company disclosed that its second-quarter profits would be sharply lower than anticipated because of climbing medical costs at its health maintenance organizations.
"With the previously announced higher-than-anticipated rise in medical costs for the second quarter, we have an even stronger sense of urgency to make the changes necessary to get our health business on the right track," Donaldson said Thursday.
Many industry analysts said the company has been distracted from its core business because of the merger talks and management issues.
Hectic activity
For ING, the buyout caps a period of hectic activity in North America for Dutch financial firms.
Rival Aegon NV bought Transamerica for $10.8 billion in February 1999, and ABN Amro has built itself into the largest overseas bank in the United States through a series of acquisitions, mainly around Chicago and elsewhere in the Midwest.
The Aetna deal is expected to close by the end of the year, subject to regulatory and shareholder approval. 
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ING Groep
Aetna
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