Health-source Inc., which offers health maintenance organization coverage in 15 states, has agreed to be acquired by the insurance company CIGNA Corp., which has operations in Utah, for about $1.7 billion in cash.
The deal demonstrates the movement by health-care insurance providers to team up to expand their base of subscribers so that they can command better deals from health-care providers and reduce costs.CIGNA said Healthsource gives it access to new markets and enhances its competitive position in other markets.
The deal will leave CIGNA with health maintenance organizations with about 5.3 million members and a medical indemnity business covering seven million people.
CIGNA chief executive Wilson H. Taylor said he expects CIGNA and Healthsource may be able to save more than $75 million in costs as a result of the marriage.
"Health care is our largest and most profitable business, and this transaction will further strengthen our operation to the benefit of our shareholders," Taylor said.
The sale is subject to regulatory approval.
CIGNA agreed to pay $21.75 per share for each Healthsource share.
That represents a 29 percent premium over Healthsource's closing stock price of $16.871/2 a share on Thursday on the New York Stock Exchange.