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WellPoint to Buy Georgia's Largest Health Insurer

July 10, 1998|From Bloomberg News

WellPoint Health Networks Inc. said Thursday that it will buy Cerulean Cos., Georgia's largest health insurer, for about $500 million in stock and cash.

Cerulean, which is converting from a nonprofit, private organization to a for-profit company, is the parent of Blue Cross & Blue Shield of Georgia and has about 1.7 million members. WellPoint, one of the largest managed-care companies in California, is the parent of Blue Cross of California.

Woodland Hills-based WellPoint, which already has about 100,000 members in Georgia, is buying Atlanta-based Cerulean in a bid to expand operations outside its core market in California, home to about two-thirds of its 6.7 million health-plan members. Increasing its presence in national markets will help Wellpoint land more large employers as customers.

"It's very positive in that it makes sense from a strategic point for WellPoint," said Kevin Holt, an analyst with Strong Capital Management. "Georgia is only 14% held by managed care, which means there's lots of potential."

Shares of WellPoint rose $1.44 to close at $71.06 on the New York Stock Exchange.

The companies said they expect the purchase to close in the fourth quarter. WellPoint Chairman and Chief Executive Leonard Schaeffer said the acquisition will have a "neutral" impact on profit in 1999 and add 5 cents to 10 cents a share to earnings the following year.

"These two companies are extremely complementary," Schaeffer said.

WellPoint said it would issue up to $500 million worth of stock to Cerulean shareholders in the acquisition. Holders of Cerulean Class A shares can receive cash instead, up to a limit of about $225 million.

WellPoint also said that it's boosting its stock buyback program to as many as 8 million shares, from 1 million shares. The new limit represents about 11% of WellPoint's 70.1 million common shares outstanding.

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