Medicaid Merger Sends Stocks Flying

Photo courtesty of wikicommons

WellPoint Inc. (WLP) has agreed to purchase Amerigroup Corporation (AGP) in a move that could spur a wave of Medicaid mergers, Bloomberg says.

Indianapolis-based WellPoint is currently the second-biggest U.S. health insurer. The company operates Healthy Alliance Life Insurance Company, the largest insurer in the state of Missouri. According to a joint press release, WellPoint will pay $4.9 billion for the Amerigroup, or $92.00 per share, a 43 percent premium based on the company’s July 6 closing price.

After the deal, WellPoint will provide Medicaid for 4.5 million people through state-sponsored healthcare programs in 19 states.

“The acquisition of Amerigroup expands our scale and further diversifies our business mix by deepening our investment in the high growth Medicaid marketplace,” Wayne S. DeVeydt, Well Point Executive Vice President and Chief Financial Officer said in a statement. “We believe the acquisition is not only strategically important, significantly enhancing our future revenue and earnings per share growth opportunities, but will also provide an attractive return for our shareholders.”

WellPoint doesn’t expect a change in earnings per share for 2012, but expects to see a change in 2013 with an EPS increase of more than a dollar by 2015.

After the deal, stock prices throughout the Medicaid industry rose. St. Louis-based Centene’s (CNC) stock was up almost 20 percent. Molina Healthcare (MOH) was up nearly 18 percent as was WellCare Health Plans Inc. (WCG).




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