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 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!