National Health Care Systems Inc., an 8-year-old dental health maintenance organization, announced Friday that it intends to sell all of its outstanding shares to a Sacramento-based HMO as a way to expand into Northern California.
"It's a very exciting time for us," said National Health Care Systems chief executive Dr. Carl Bozzo about the sale. "We're going to be a perfect match."
The buyout would affect some 15,000 Orange County customers of National Health Care Systems, who would eventually be able to add medical coverage to their current dental plans.
Bozzo said that the takeover agreement by Foundation Health Corp., an HMO which currently offers no dental plan, was reached after seven weeks of negotiations. National Health Care Systems will become a wholly owned subsidiary of Foundation Health if the deal is approved by federal regulators, stockholders and the state Department of Corporations, said Bozzo, who expects approval by November.
National Health Care Systems will continue to operate out of its Laguna Niguel headquarters.
Under the sales agreement, valued at $24.4 million, holders of National's 7.4 million outstanding common shares could sell shares to Foundation Health for $3.30 each, or trade them one-for-one for Foundation Health stock in a tax-free exchange. "The stockholders should be very happy," Bozzo said.
Foundation Health is a $1-billion corporation that administers health coverage to 1.2 million people through five medical and life insurance subsidiaries. The majority of its clients are in Northern California. Each Foundation Health customer would be eligible to receive dental care under the agreement, while National Health Care Systems customers would become eligible for medical coverage.
National Health Care Systems serves 360,000 customers and 1,800 companies and government agencies in the Bay Area and in San Bernardino, Riverside and San Diego counties. National Health Care officials first met with Foundation Health executives in June with a plan to expand its Northern California client base.
"They said, 'Why don't we just buy you?' " Bozzo said. "I said, 'I don't know. Why don't you make us an offer we can't refuse?' The bottom line was, Foundation wanted to come south and we wanted to go north. It was a perfect arrangement."
Foundation Health, which is traded on the American Stock Exchange, closed unchanged at $24.25 Friday, while National Health Care Systems, traded over the counter, lost 12.5 cents to close at $2.50.