WellPoint and Amerigroup have inked a definitive agreement in accordance with which the first will acquire Amerigroup, which will enable the acquirer to effectively and efficiently serve the growing Medicaid population.

WellPoint expects that the acquisition of Amerigroup will boost its core business and advances the combined company’s future growth potential.

It consolidation of two firms will also enable them to serve dual eligible, seniors and persons with disabilities (SPD), and long-term services and support markets (LTSS), the firm said.

As per the merger deal, WellPoint will pay $92 per share in cash to acquire all of the outstanding shares of Amerigroup for a transaction valued nearly $4.9bn.

WellPoint chair, president and chief executive officer Angela Braly said the firm expects that the integration will create an industry leader in the government sector serving Medicaid and Medicare enrollees.

"This is an opportunity to capitalize on the strengths of both companies to better serve our members and position our companies for future growth as the health insurance industry changes and as we prepare for health insurance exchanges," Braly added.

WellPoint hopes that its CareMore subsidiary’s services and care management model for chronically ill and frail members together with Amerigroup’s deep experience and leading LTSS programs will increase the ability to improve the quality of care for deprived people at lowest possible cost.

The consolidated company’s Medicaid footprint will include 19 states, serving over four-and-a-half million beneficiaries of state sponsored health care programs.

The deal, which is subject to certain state regulatory approvals and standard closing conditions and customary approvals required under the Hart-Scott-Rodino Antitrust Improvements Act and the approval of Amerigroup’s stockholders, is expected to close during the first quarter of 2013.

Credit Suisse acted as financial advisor of WellPoint, while Linklaters offered legal advisor while Goldman Sachs & Co and Barclays worked as financial advisors to Amerigroup, while Skadden, Arps, Slate, Meagher & Flom provided legal advice.