WellPoint (NYSE: WLP) buying Amerigroup for about $4.46B

Atlanta, GA 7/6/12 (StreetBeat) -- Health insurer WellPoint Inc. (NYSE: WLP) is buying managed care provider Amerigroup Corp. (NYSE: AGP) for about $4.46 billion in cash, saying the deal will help it better serve Medicaid participants.

Amerigroup manages publicly-funded health programs like Medicaid, the state-federal program that provides coverage for the needy and disabled. It operates in 13 states, including Texas, Florida, New York and New Jersey.

The combined company will serve Medicaid recipients in 19 states.
Indianapolis-based WellPoint said Monday that it will pay $92 for each Amerigroup share. That's a 43 percent premium to the company's closing price Friday of $64.34.

Amerigroup currently has about 48.5 million outstanding shares, according to FactSet.

Shares of Amerigroup soared $25.86, or 40.2 percent, to $90.20 in premarket trading, while WellPoint's stock gained $1.29, or 2.2 percent, to $61.20.

The companies put the total value of the deal at about $4.9 billion. WellPoint says it will fund the acquisition with available cash, commercial paper and by issuing new debt.

"We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees," WellPoint Chair, President and CEO Angela Braly said in a statement.

Once the buyout is complete, WellPoint and its affiliated Medicaid plans will serve more than 4.5 million beneficiaries of state sponsored health care programs.

It will also have a presence in 13 states with significant numbers of people eligible for managed care under dual government programs, including the four largest states that have a combined $105 billion in annual dual eligible spending.

The transaction is expected to close in 2013's first quarter. It still needs certain regulatory approvals and the approval of Amerigroup stockholders.

The deal is expected to add to WellPoint's 2013 earnings per share and add more than $1 per share by 2015. The company is maintaining its 2012 earnings outlook.

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Centene (NYSE: CNC) sees Q2 loss, cuts 2012 view, shares plunge

Orlando, FL 6/11/12 (StreetBeat) -- Health insurer Centene Corp (NYSE:CNC) said it will post a loss in the second quarter and slashed its earnings forecast for 2012, citing higher costs and claims in Texas and Kentucky, and its Celtic individual health business.

The company's shares plunged 21 percent to $28.00 in premarket trade on Monday.

The health insurer also said it was evaluating the goodwill and intangible assets of its Celtic business and the review may result in a non-cash charge of about $28.0 million. The charge has not been accounted for in the current outlook, it added.

Centene now expects 2012 earnings of $1.45 to $1.65 per share, down sharply from its previous outlook of $2.64 to $2.84 a share.

The company said it expects to return to profitability in the third quarter, even as rising costs at its Texas, Kentucky and Celtic businesses impact results for the rest of the year.

The news comes less than a week after rival Molina Healthcare Inc (NYSE:MOH) withdrew its 2012 earnings forecast, claiming it was facing margin pressure in a Texas Medicaid plan.

Molina's Medicaid plans servicing the El Paso and Hidalgo counties in Texas saw high medical costs that outstripped the company's premium revenue from the region.

The El Paso and Hildago service areas experienced significantly higher-than-expected utilization in a contract that became active in March, Jefferies & Co analyst David Windley said in a note on Molina last week.

Centene too said on Monday it saw a significant rise in certain non-inpatient claims in its Hidalgo service area.

Other health insurers, such as Amerigroup Corp (NYSE:AGP) and Cigna Corp (NYSE:CI), which have plans for the El Paso and Hidalgo counties, may also be affected.

Shares of Molina had crashed early last week after it withdrew its full-year outlook, dragging down Centene shares with them. However, both stocks recovered much of the lost value later in the week as Molina and Centene won back a Medicaid contract in Ohio.

Centene shares, which have lost 5 percent of their value since Molina announced its margin issues in Texas, closed at $35.47 on Friday on the New York Stock Exchange.

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