FHP to Acquire Colorado HMO for $3.5 Million : Health: The buy from Aetna, if approved, will be the company’s first in almost 20 years. News doesn’t help stock.

Health care provider FHP Inc., in its first acquisition in nearly two decades, said Tuesday it plans to pay $3.5 million to buy a Colorado health maintenance organization owned by Aetna Life & Casualty Co.

FHP, which operates in five western states and on two islands in the Pacific, will pick up 4,700 HMO members in purchasing Aetna Health Plans’ HMO. Aetna will continue to offer preferred provider and other health plans to 80,300 other Coloradans.

The deal is subject to approval by insurance officials in Colorado, and FHP hopes to receive clearance within two months, said company spokeswoman Ria Marie Carlson.

“This acquisition continues FHP’s strategy for growth,” Westcott W. Price III, the company’s president, said in prepared remarks. “This HMO is a solid plan that gives FHP its first opportunity to enter the thriving Denver market.”

Colorado is a neighbor to several states--Utah, Arizona and New Mexico--in which FHP operates. The company also has members in California, Nevada and on the islands of Guam and Saipan. About half of its 850,000 members are in California.

News of the acquisition did little to stem FHP’s falling stock price. The stock closed Tuesday at $23.125 a share, down $1.375 a share on the NASDAQ system. Nearly three weeks ago, FHP shares hit a 52-week high of $29.75.

FHP executives aren’t sure what has caused the slide, but HMOs in California generally have shown some weakness in the last few weeks, said Anna Marie Dunlap, FHP’s investor relations officer.

The slide started, she said, after Foundation Health Plan in Sacramento announced several weeks ago that it had lost a major government contract that had provided it with about half its income. In addition, she said, national health care reform is imminent.

“Now, with the budget out of the way, the entire focus for the Clinton Administration is on health care reform, and there’s a lot of uncertainty about what is going to happen,” she said.

In addition, New York brokerage Bear, Stearns & Co. on July 27 reduced its recommendation on FHP stock from “strong buy” to simply “buy” and lowered its earnings estimate, citing the company’s expenses in attracting business. Dunlap, however, said the brokerage was the only one that had higher expectations about FHP than its colleagues on Wall Street had.

While Bear Stearns, for instance, was expecting FHP earnings this year of $1.90 a share, analysts covering the company for other Wall Street brokerages predict $1.60 to $1.70 a share. Now, she said, all the analysts are in the same range.