WellPoint Gets $4.9B Healthier with Purchase of AmeriGroup

In the growing Medicaid marketplace, health insurer WellPoint (WLP) announced plans to buy AmeriGroup (AGP) for nearly $4.9 billion ($92 per outstanding share) in order to double its Medicaid business across 19 states. The deal is in response to the federal government’s expansion of eligibility in Medicaid, as well as the U.S. Supreme Court upholding the health-insurance reform law, which would further expand Medicaid eligibility to 16 million Americans who currently would not be eligible.

WellPoint, Inc. (NYSE:WLP)

Upon the announcement of the news Monday, WellPoint stock rose 3 percent and AmeriGroup rose 38 percent (the bid price was 43 percent above Friday’s close). In the sector, other players saw profits as this deal raised speculation of other acquisitions in the near future.

Christian Leone’s Luxor Capital just added about $47 million in AmeriGroup stock to its portfolio in the first quarter of 2012, so the large jump in price certainly warrants the investment with immediate rewards. Billionaire Jim Simons, Ken Griffin, and Andreas Halvorsen were also among the hedge fund managers who profited handsomely from the deal.

Angela Braly, CEO of WellPoint, said in a press release that “this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees. This is an opportunity to capitalize on the strengths of both companies to better serve our members … as we prepare for health-insurance exchanges,” referencing the exchanges in the federal Affordable Care Act.

Though the timing of the deal was convenient, Braly insisted that the Affordable Care Act wasn’t as much the catalyst of the deal as much as the government’s trend of moving government-backed health-insurance programs into the private sector to hold down costs. She estimated Medicaid spending in th private sector to increase by $100 billion by the time the Affordable Care Act is fully implemented in 2014.

Those close to the deal said it should not raise many red flags to regulators, as AmericGroup’s largest markets are Texas, Florida, Georgia and New York – where WellPoint has not had much of a footprint. This lack of overlap, the sources say, should allow this deal to go through and be finalized by the first quarter of 2013.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!