FHP, TakeCare Holders OK $1-Billion Merger

As expected, shareholders of FHP International Corp., the Orange County-based health maintenance organization, and those of its Northern California competitor TakeCare Inc. have approved a $1-billion plan to merge the companies into the state’s third-largest HMO.

Under the plan, FHP in Fountain Valley will acquire TakeCare of Concord for about $1.03 billion, or about $80 a share. Both groups of shareholders voted June 10.

Slated to be completed by Friday, the merger will make FHP the fifth largest managed care provider in the nation, covering 1.7 million people in 11 western and southwestern states. The company will have annual revenue of about $3.2 billion.

“This has some real advantages for FHP,” said Thomas Hodapp, an analyst with Robertson Stephens & Co. in San Francisco. “They are going to face a challenging year of merging with a very big company, but this makes them a leader in two large markets, Colorado and Northern California.”

FHP stock closed unchanged at $24.62 a share Monday in Nasdaq trading. TakeCare’s stock was up 43.7 cents to close at $76.81 a share in Nasdaq trading.

In January, both companies agreed to an acquisition price of about $800 million, or about $62 a share. Major TakeCare shareholders filed suit, claiming the price was too low, and asked the board to reopen the bidding process. Three other bids were received, and the companies finally agreed on a deal involving a combination of cash, common stock and new convertible preferred stock.

The new company will have about 14,000 employees and there are no major layoffs planned, said an FHP spokeswoman.

“Right now we are looking at individual departments on a case-by-case basis,” said Ria Carlson, spokeswoman for FHP. “There’s very little overlap, so there are no sweeping layoffs planned.”