WellPoint Announces AMERIGROUP Acquisition

Health benefit provider WellPoint

announced on Monday it is acquiring managed healthcare company AMERIGROUP Corporation

for approximately $4.9 billion in cash, or $92 for each share outstanding. Both companies jointly stated that they had entered into a definitive agreement of acquisition to create better-quality healthcare at prices that are more affordable. "We believe 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 and position our companies for future growth as the health insurance industry changes and as we prepare for health insurance exchanges,” said WellPoint Chief Executive Officer Angela F. Braly. The move is the latest in a round of consolidation that has swept the healthcare industry following the Affordable Care Act (ACA), commonly referred to as

. The Supreme Court upheld the ruling last month, renewing the necessity of all operators throughout the vertical healthcare spectrum to ready for a transformative era in which the ability to severely cut down costs is paramount. Synergies through consolidation is increasingly seen as the only way to match the inexpensive coverage that will be provided by the healthcare insurance exchanges that are required under the ACA. “Today's health care arena is more transformative than ever and companies must have broad capabilities to succeed,” said Amerigroup's Chairman and Chief Executive Officer James G. Carlson. “We know that lowering costs for states while improving the quality of care for program beneficiaries is a winning proposition for our members, company, associates, shareholders and the entire health care system.” The deal is still subject to approval from AMERIGROUP Corporation shareholders as well as regulatory bodies under the Hart-Scott-Rodino Antitrust Improvements Act, but it is expected to be complete by the first quarter of 2013. The combined company will have a footprint in 19 states, and serve more than 4.5 million state-sponsored healthcare program beneficiaries. WellPoint expects the union to be accretive to its per-share earnings by 2013. Said accretion is expected to reach as much as $1.00 per share by 2015. AMERIGROUP Corporation shares closed Friday at $64.34. As of this morning, that price has soared almost 40 percent, reaching near the proposed acquisition level. Wellpoint, in the mean time, is up a more modest 1.8 percent from Friday's $59.91 closing price.