By Amy Jeter
WellPoint Inc., one of the nation's largest insurers, will buy Virginia Beach-based Amerigroup Corp. for about $4.9 billion in a transaction expected to close early next year, the companies announced Monday.
Under the agreement, Amerigroup would lead the combined company's Medicaid managed care business, which would serve 4.5 million beneficiaries of the federal-state insurance for low-income people and the disabled.
The acquisition comes as states ponder whether to expand their Medicaid programs, as directed by the Affordable Care Act. The U.S. Supreme Court's decision last month said states couldn't lose all federal Medicaid funding if they declined the expansion.
Company leaders said several of Amerigroup's top executives have agreed to stay on, and though they couldn't yet disclose details, they hinted that the change could add more jobs in Hampton Roads, where Amerigroup employs 2,300. WellPoint is based in Indianapolis.
"I'm really proud to believe that this transaction anchors Amerigroup in Hampton Roads beyond any horizon that I can see," said James G. Carlson, Amerigroup's CEO and chairman. "Our workforce has doubled as a company from 3,300 to 6,600 since 2007. If you just understand the trajectory of our employment growth, you can get pretty comfortable that we'll be growing in Hampton Roads, as well as other markets we serve."
Virginia Beach Mayor Will Sessoms said the announcement could bring good news to the city. He said Amerigroup told him "there was a possibility of a couple hundred more jobs coming to the region."
However, Sessoms remained cautious.
"To sit back and tell you I'm not concerned, that would be a mistake," he said. "You never know when a company's purchased if they're going to take all their jobs somewhere else."
Amerigroup was founded in 1994 by Jeffrey L. McWaters, who is now a state senator. The company became a publicly traded corporation in 2001 and has rapidly expanded.
Now a Fortune 500 company, Amerigroup manages care for about 2.2 million members in 12 states and has been awarded contracts to begin services in two others. As of March 31, it counted about 46,000 Virginians as members in northern and western parts of the state, but doesn't currently have a presence in South Hampton Roads.
Joining WellPoint was attractive because it offered an opportunity to expand Amerigroup'sMedicaid membership and serve more "dual eligibles," low-income elderly and individuals with disabilities who are enrolled in both Medicaid and Medicare, said Maureen McDonnell, an Amerigroup spokeswoman.
"This agreement will allow us to cover more lives with the same coordinated care, with the same integrity and same compassion because we have such similar missions," McDonnell said.
Amerigroup appealed to WellPoint more than other similar companies for several reasons, including its quality, growth trajectory and the way it cared for members, said Angela F. Braly, WellPoint's chairwoman, president and CEO: "There was no real consideration of anything but how great Amerigroup was and how important the management team would be to us."
The deal - which still needs certain regulatory approvals and the approval of Amerigroup stockholders - benefits both parties, said Joe France, a health care analyst with Cantor Fitzgerald.
WellPoint bolsters its government business, a former weakness because of its small size, while Amerigroup gains more medical management expertise and resources to expand faster, he said.
Ira Agricola, senior vice president of the Hampton Roads Chamber of Commerce, saw potential pluses and minuses for South Hampton Roads. The region would have another connection to an organization with national buying power and marketing prowess, he said, but local companies might lose out if purchasing decisions are made at the corporate level in Indianapolis.
Agricola said he hoped WellPoint would continue Amerigroup's deep involvement in the community, and he acknowledged the benefit for local investors.
Under the agreement, WellPoint will pay $92 per share in cash to acquire all of the outstanding shares of Amerigroup. Amerigroup currently has about 48.5 million outstanding shares, according to FactSet.
Amerigroup's stock price jumped $24.45, or 38 percent, in response to the announcement Monday, closing at $88.79. Trading volume on the stock was 18 times the three-month average. Shares of WellPoint rose a more modest $2.04, closing at $61.95, up 3.4 percent.
"That certainly will create significant financial wealth in our region among those shareholders," Agricola said. "That's very positive."
McWaters, who retired from Amerigroup five years ago, said the company had been approached several times for a sale, but the "timing just wasn't right."
He sold all of his stock when he became involved with the state Senate, but he understood why this deal was good for shareholders.
"In a public company, when someone offers you that kind of premium, you don't have much choice," McWaters said.
He said Monday's news made him feel pleased and reflective - "blessed is even a better word," he said, "for me to have been part of the company."
Pilot writers Carolyn Shapiro and Philip Walzer contributed to this report.
Amy Jeter, 757-446-2730, [email protected]
Amerigroup Corp. would lead the combined company's Medicaid managed care business, which would serve 4.5 million beneficiaries of the federal-state insurance program for low-income people and the disabled.
more jobs? maybe.
Virginia Beach Mayor Will Sessoms said Amerigroup told him "there was a possibility of a couple hundred more jobs coming to the region."