WellPoint Wins Bidding War for Cerulean
Shares of WellPoint Health Networks Inc., one of California’s largest health-insurance companies, rose 7% on Thursday after it won a bidding war for Cerulean Cos., Georgia’s largest health insurer.
WellPoint shares rose $7.31 to close at $107.81 on the New York Stock Exchange, on the second-heaviest trading day ever for the NYSE, with decliners outnumbering advancing shares by 2 to 1. Earlier Thursday, WellPoint shares had reached $111.25.
The Cerulean acquisition could add 20 cents a share to WellPoint’s earnings next year and 45 cents in 2002, Lehman Bros. analysts Lawrence Marsh and Joshua Raskin said in a report. WellPoint has said the transaction wouldn’t hurt earnings in 2001 and would add 10 cents to 15 cents a share in 2002, the analysts said.
Bear Stearns analyst John Rex reiterated a “buy” rating and $120-a-share price target for WellPoint.
Rex said in a research note that the Cerulean acquisition should be neutral or add 5 cents a share to WellPoint’s earnings.
WellPoint raised its bid to $700 million in cash from $500 million in cash and stock, topping a surprise offer of $675 million from Trigon Healthcare Inc. in a battle between Blue Cross and Blue Shield companies.
The transaction is expected to close next year, Thousand Oaks-based WellPoint and Atlanta-based Cerulean said in a statement.
WellPoint, which owns Blue Cross of California, agreed in July 1998 to buy Cerulean to gain customers outside California. WellPoint has about 7.7 million customers, and Cerulean, the parent of Blue Cross and Blue Shield of Georgia, has about 1.8 million.
The transaction was delayed by a lawsuit that claimed 70,000 additional Cerulean shareholders were entitled to participate in the offer, which was restricted to owners of convertible shares. WellPoint agreed in October to pay $5 million to settle the lawsuit.
“While we are disappointed in not winning Cerulean, we certainly are not discouraged,” Trigon Chief Executive Thomas Snead Jr. told analysts in a conference call. “We are comfortable with our decision not to raise our bid.”
Shares of Trigon rose $4.19 to close at $71.69 on the NYSE.
Trigon said it will look for other acquisitions in the mid-Atlantic and Southeast regions. The company, which owns Trigon Blue Cross Blue Shield, has about 2 million customers.
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Point Well Taken
WellPoint Health Networks stock has gained 64% so far this year. Though it’s off from its 52-week high of $121.50 set in October, Bear Stearns analyst John Rex on Thursday reiterated a “buy” rating and $120-a-share price target for WellPoint shares.
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WellPoint Health Networks, monthly closes and latest on the New York Stock Exchange
Wednesday: $107.81, up $7.31
Source: Bloomberg News
