US health insurance company UnitedHealth Group is preparing to close the gap on its rival WellPoint by acquiring PacifiCare Health Systems in an $8 billion combined cash and stock deal.
United currently stands as the second biggest health insurer in the US, while WellPoint has been the largest ever since completing its $16 billion merger with Anthem last year.
The PacifiCare purchase will enable United to close the gap to its larger rival in terms of overall customer numbers and establish a stronger presence in the west of the US, as such giving it greater geographical coverage.
PacifiCare Health Systems provides healthcare services to around nine million people, predominantly in the western US states, while United’s traditional strongholds are the Atlantic states and northeast US. The combined company will have 26 million customers, just two million short of WellPoint.
Under the terms of the agreement, PacifiCare shareholders will receive UnitedHealth Group stock at a fixed exchange ratio of 1.10 shares for each PacifiCare share, plus $21.50 in cash per PacifiCare share.
This combination will bring the best of both companies forward in a manner that respects each one’s unique history and contributions while advancing a national presence that can help address a highly fragmented health care system, said UnitedHealth group chairman and CEO Dr William McGuire.
The purchase is expected to be completed in late 2005 or early 2006.