Stocks rise on merger news

INDIANAPOLIS -- Health benefits insurer Anthem Inc. is buying bigger rival WellPoint Health Networks Inc. for about $16.4 billion in cash and stock in a deal that will combine the nation's two largest Blue Cross Blue Shield concerns.\nUnder the deal announced Monday a company would be created that will cover nearly 26 million people and operate in 13 states.\nIndianapolis-based Anthem, second-largest Blue Cross health insurance provider, will pay those who own shares in its larger rival $23.80 in cash and one share of Anthem common stock per WellPoint share.\nAnthem shares closed at $77.26 a share on Friday on the New York Stock Exchange, boosting the value of the cash-and-stock offer to $101.06 a share. That is a 20 percent premium over WellPoint's share price of $83.93 on Friday.\nIn morning trading on the New York Stock Exchange, WellPoint shares rose $6.57, or 7.8 percent, to $90.50 while Anthem shares fell $7.06, or 9.1 percent, to $70.20.\nThe merger is expected to close by mid-2004, after approval by regulators and shareholders.\nThe combined company's name will be WellPoint Inc., with the corporate headquarters in Indianapolis.\n"This merger creates the nation's leading health benefits company with an outstanding opportunity to set the industry standard and better serve our members, employer groups, physicians and hospitals, agents and brokers, and our communities," said Leonard Schaeffer, chairman and chief executive officer of WellPoint.\nAnthem has about 11.8 million members, about 2 million below the membership of Thousand Oaks, Calif.-based WellPoint.\nAnthem is a Blue Cross and Blue Shield licensee in nine states: Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Colorado, Nevada and Maine, and part of Virginia.\nWellPoint operates in California, Georgia, Missouri and Wisconsin.\nAnthem and WellPoint are part of a federation of 42 independent locally-operated Blue plans that belong to an association. The Blue plans started over 70 years ago, and were originally all nonprofit organizations known as "the insurer of last resort" because they would enroll everyone regardless of their health.\nThat has changed in recent years as the health insurance industry has become a more competitive business.\nThe proposed merger illustrates the Blues' evolution. Like Anthem and Wellpoint, many Blue plans have chosen to shed their nonprofit status to become public companies to gain additional access to capital to buy computers and systems -- as well as other insurers -- to remain competitive. Indeed, mergers between the Blues have also become increasingly common to gain market share and economies of scale.