Aetna May Buy an HMO in Orange County : Heath care: FHP International or PacifiCare could be targeted as the insurer expands its medical businesses, analysts say.
Aetna Life & Casualty Co. is expected to use the $4 billion it receives from the sale of its property and casualty unit to buy a health maintenance organization--and two Orange County companies appear to be among the top candidates.
Aetna, the largest publicly traded U.S. life insurer, could launch a bid to acquire FHP International Corp. of Fountain Valley or PacifiCare Health Systems Inc. of Cypress with the proceeds of the unit sale to Travelers Group Inc., analysts said.
“You have to look at companies with strong management and market values that would allow Aetna to buy them with the $4 billion,” said Dean Witter Reynolds analyst Michael Lewis. “PacifiCare and FHP come to mind.”
Spokeswomen for both companies refused to comment on the reports.
Shares of FHP International Corp. and PacifiCare Health Systems Inc. rose Thursday on high trading volume. FHP shares rose $1.875 to close at $29. About 1 million shares changed hands, double the company’s recent average daily volume. PacifiCare closed at $82.50, up $2.50. About 122,000 shares were traded, roughly 20% more than usual.
Aetna is planning to expand its health insurance and retirement services businesses, an Aetna official said.
“We’ve made no secret about the fact that we are looking in the health care industry for acquisitions,” the official added.
He wouldn’t discuss potential targets, but said, “We aren’t ruling anybody out.” He declined to say whether the large number of senior citizens on FHP and PacifiCare health plans would make either company attractive to Aetna.
Separately, FHP said Thursday that it agreed to sell its FHP Hospital in Fountain Valley to Memorial Health Services in Long Beach. FHP announced plans last summer to seek buyers for hospitals in Fountain Valley and South Salt Lake, Utah, as part of a strategy to provide health care services to its members through outside contractors rather than through FHP-owned hospitals.
The 220-bed Fountain Valley hospital, the larger of the two, employs 772 people. Thomas Collins, president and chief executive at Memorial Health Services, said the company plans to expand services at the Fountain Valley hospital and retain its 772 employees.
Memorial Health Services, which owns Long Beach Memorial Medical Center and Saddleback Memorial Medical Center in Laguna Hills, announced a merger two weeks ago with Anaheim Memorial Hospital.
