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November 21, 2001 at 07:00 PM
NU Online News Service, Nov. 21, 11:07 a.m. – WellPoint Health Networks Inc., Thousand Oaks, Calif., has announced plans to acquire CareFirst Inc., Owings Mills, Md., for $1.3 billion in cash and WellPoint stock.
CareFirst is a nonprofit holding company for the Blue Cross and Blue Shield plans in Delaware, Maryland and the District of Columbia. It provides major medical coverage for 3.1 million people.
The company generated $86 million in net income in 2000 on $3.6 billion in revenue.
The CareFirst announcement comes on the heels of the Oct. 18 announcement of WellPoint plans to acquire RightChoice Managed Care Inc., St. Louis, a for-profit plan, for $1.3 billion in cash and stock.
WellPoint, the for-profit parent company of Blue Cross of California and Blue Cross and Blue Shield of Georgia, sells health insurance on a national basis through a third subsidiary, UNICARE.
But some securities analysts have suggested it may rely too heavily on revenue from its home state, California.
The CareFirst deal “strengthens WellPoint’s presence in a core strategic market and further diversifies our business,” WellPoint Chairman Leonard Schaeffer says.
WellPoint now has only 82,000 members of its own in the Mid-Atlantic region.
William Jews, CareFirst president, says his organization agreed to the deal because WellPoint is a strong company that has demonstrated its ability to handle mergers and acquisitions successfully.
The deal should also give the combined company more ability to invest health care infrastructure than CareFirst would have had on its own, Jews says.
Officials in Delaware, Maryland and the District of Columbia say CareFirst is a charity that holds its assets in trust for the benefit of the public.
