WellPoint agrees to buy NY rival WellChoice for $6.5 billion

INDIANAPOLIS (AP) _ WellPoint Inc., the nation's largest health insurer, announced an agreement Tuesday to buy WellChoice Inc., an insurer with about 5 million customers in New York and New Jersey,

Tuesday, September 27th 2005, 9:54 am

By: News On 6

INDIANAPOLIS (AP) _ WellPoint Inc., the nation's largest health insurer, announced an agreement Tuesday to buy WellChoice Inc., an insurer with about 5 million customers in New York and New Jersey, for about $6.5 billion in cash and stock

Better known as Empire Blue Cross Blue Shield, New York-based WellChoice is the largest health insurer in New York State. Previously a nonprofit, it converted to a profit-making venture in 2002 and went public.

Together, WellPoint and WellChoice will serve more than 33 million members in 14 states, the companies said.

Indianapolis-based WellPoint said it would pay $77.23 in cash and stock per WellChoice share, about 9.4 percent more than WellChoice's closing price Monday.

WellChoice shares rose $4.85, or 6.9 percent, to $75.45 in morning trading Tuesday on the New York Stock Exchange, while WellPoint shares gained 86 cents, or 1.2 percent, to $75.95.

Larry C. Glasscock, WellPoint's president and chief executive officer, said the companies did not expect any premium increases because of the deal.

``The synergies we can achieve through this merger, along with the ability to spread administrative costs over a larger membership base, will contribute to our ongoing efforts to keep premiums affordable for customers,'' he said.

WellPoint, which has about 28 million customers, also uses the Blue Cross and Blue Shield brand names for its subsidiaries. It was formed last year, when Anthem bought WellPoint Health Networks Inc. and changed its name.

The companies said they expected the transaction to close during the first quarter of 2006 pending stockholder and regulatory approvals.

The merger is expected to be neutral to earnings this year but will boost profit beyond 2006, WellPoint said. The company is projecting pretax cost savings of $25 million in 2006, $50 million in 2007 and at least $125 million by 2010.