Merger Would Create Health Care Colossus : Acquisitions: Combined United HealthCare and MetraHealth operation would have revenue of more than $8 billion.

United HealthCare Corp. said Monday that it will pay $1.65 billion for MetraHealth Cos., the combined group health care operations of Metropolitan Life Insurance Co. and Travelers Insurance Co.

The deal would create the nation’s biggest health care management services company.

The combined United HealthCare and MetraHealth operation would have more than $8 billion in annual revenue and more than 40 million enrollees in a variety of programs providing health care management products and services.

Under the definitive agreement, United HealthCare would offer MetraHealth $1.15 billion in cash and $500 million in convertible preferred stock. The deal would be accounted for as a purchase transaction.

The stock would be convertible into United HealthCare common stock at $49.48. It would have a three-year no-call provision and be redeemable in 10 years.

McLean, Va.-based MetraHealth, a privately owned company, was formed in January.

MetraHealth has about 730,000 people enrolled in various health plans in California, primarily in the Los Angeles and San Francisco areas. The operations include the MetLife HealthCare Network, a health maintenance organization with more with 65,000 members in California. MetraHealth’s current owners could receive up to an additional $350 million in either cash, convertible debt, convertible preferred stock or straight debt if MetraHealth achieves certain financial results this year.

They are also eligible to receive up to $175 million in cash for 1996 as well as ’97 if the company’s post-acquisition combined net income for those years reaches certain targets.

The deal is expected to boost United HealthCare’s earnings immediately upon closing, the company said.

“Our two companies complement and strengthen each other in terms of geographic presence, product strengths, distribution channels and core competencies, and both have built outstanding management teams,” said William McGuire, president, chairman and chief executive of United HealthCare.

McGuire would become chairman and chief executive of the combined company.

MetraHealth’s chairman and chief executive, Kennett Simmons, would join the new company’s board as a director and serve as chairman of the board’s executive committee.

The companies said they do not plan layoffs as a result of the deal.

“We’re not bringing these businesses together with the notion that the way to achieve success is to lay off lots of people,” McGuire said in an interview.

Minnetonka, Minn.-based United HealthCare, founded in 1974, has more than 3.7 million managed health plan members and more than 27 million people covered by various specialty services.

MetraHealth covers more than 10 million individuals, including 4.6 million in network-based care programs, about 450,000 of whom are health maintenance organization members. It provides health-related services to 58,000 companies and covers about 18 million individuals through its specialty care programs.

United HealthCare closed unchanged at $43 on the New York Stock Exchange.