UnitedHealth
Group said it received all necessary approvals to complete its $9.2 billion
acquisition of PacifiCare Health Systems Inc. However, the U.S. Department of Justice said it is requiring the companies to divest portions of PacifiCare's commercial health insurance business in Tucson, Ariz., and Boulder, Colo., in order for the merger to proceed. The justice department also is requiring UnitedHealth to modify and, after one year, end its network access agreement with Blue Shield of California. As originally proposed, the deal likely would have resulted in higher prices and lower quality commercial insurance plans, the justice department said.
Mark Lindsay, a spokesman for UnitedHealth, told BestWire the issues that the justice department raised have been resolved.
The justice department said its antitrust division filed a civil lawsuit Dec. 20 in federal district court in Washington, D.C., to block the proposed merger, but at the same time, simultaneously filed a proposed consent degree, that, if approved by the court, would resolve its competitive concerns and the lawsuit.
"We appreciate the diligence and effort taken by the various regulatory agencies involved in the review and approval of this merger," said Dr. William W. McGuire, chairman and chief executive officer of the Minneapolis-based UnitedHealth Group (NYSE: UNH), in a statement. "All of us recognize the importance of our activities relative to the health and well-being of our society and take seriously the commitments we have made to help advance access, quality, affordability and simplicity, in health care for all the people we serve."
The equity value of United-PacifiCare deal is $8.1 billion, while debt adds another $1.1 billion, creating a total value of $9.2 billion.
"We look forward to combining the resources of our companies and leveraging our strengths to advance health and well-being on behalf of seniors employers, consumers and health plan providers in the western United States, as well as nationally," said Howard Phanstiel, chief executive officer of the Cypress, Calif.-based PacifiCare, who will take on the additional role as executive vice president for UnitedHealth Group.
In July, UnitedHealth said it would merge with PacifiCare (NYSE: PHS). Under the transaction, PacifiCare shareholders were to swap for UnitedHealth stock at a fixed exchange ratio of 1.1 shares for each PacifiCare share, plus $21.50 in cash per PacifiCare share.
UnitedHealth has six operating units — UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix, which serve about 65 million people nationwide. Prior to its acquisition of PacifiCare, UnitedHealth's commercial business membership, including risk-based and fee-based, stood at about 28.5 million. PacifiCare has about 3.2 million health plan members and about 11.3 million specialty members nationwide.
California Insurance Commissioner John Garamendi and the California Department of Managed Health Care earlier this week approved the United-PacifiCare union, but the companies must ensure that Californians won't pay for the merger via increased premiums and that they will provide $250 million toward health-care improvements in under-served communities (BestWire, Dec. 20, 2005).
The $16.5 billion merger in November 2004 of Anthem Inc. and WellPoint Health Network's Inc. created WellPoint Inc. (NYSE: WLP), the largest U.S. health insurer based on membership. The Indianapolis-based WellPoint has about 29 million members, but plans to acquire New York's WellChoice Inc., the parent company of Empire Blue Cross Blue Shield.
Most operating units of UnitedHealth have Best's Financial Strength Ratings ranging from A+ (Superior) to A- (Excellent).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com) BN-NJ-12-21-2005 1720 ET #