clock menu more-arrow no yes

Filed under:

Aetna receives $10 billion takeover offer from competitor Wellpoint, Dutch bank ING

NEW YORK (AP) -- Aetna Inc., the troubled health insurer, has received a $10 billion takeover offer from WellPoint Health Networks Inc., a managed-care company, and ING Group, a Dutch investment bank and insurer.

Aetna's board has not yet responded to the $70-per-share, cash-and-stock offer, which it disclosed Wednesday was received Feb. 24, the day before Aetna ousted its Chief Executive Officer Richard L. Huber.Huber was replaced with William H. Donaldson, 68, a board member since 1977, and co-founder of the investment banking firm Donaldson, Lufkin & Jenrette.

"The Aetna Board of Directors will review the letter in due course. Aetna chairman and CEO William Donaldson has previously announced that Aetna has commenced a comprehensive review of the company's strategy and operations," according to a statement from the Hartford, Conn.-based company.

WellPoint and ING offered $44 in cash and $26 in WellPoint common stock for each share of Aetna.

WellPoint and ING both issued statements late Wednesday night confirming their bid. "ING considers the letter to Aetna to be very attractive for the shareholders of all three companies and reflects Aetna's strong position in its distinct financial services, international and health businesses," the ING statement said.

Shares of Aetna, which jumped 29 percent Wednesday, were up another 13 percent, or $7, to $60 a share in early morning trading today on the New York Stock Exchange. WellPoint's stock fell $1.433/4 to $60.433/4, and ING's U.S. shares fell $1.061/4 to $50.75.

For WellPoint, it is a bold bid by chairman and CEO Leonard D. Schaeffer. Aetna is three times larger than WellPoint with revenues of $21 billion and $7 billion, respectively. WellPoint has about 7 million health-care customers compared with Aetna's 21 million.

"It's a surprising offer given it's so much larger than anything WellPoint has ever done," said France.

But Aetna is in a weak position.

Aetna's stock, which traded as high as $99.88 last May, has been under pressure as the company foundered due to high medical costs, lagging profits and controversy over its policies toward patients. After hovering near its 52-week low of $38.50 for most of February, the shares soared 29 percent Wednesday on the news.

Investors were apparently hoping new management would move quickly to shore up the company's finances.

"This is certainly the best news we've had in a long, long time," said Joseph France, an analyst with Credit Suisse First Boston.

Last fall, the company became the target of several class-action lawsuits alleging, among other things, that its system of paying doctors rewards them for skimping on care.

The suits were filed by the same trial attorneys who won big awards against the tobacco companies. Aetna denies wrongdoing.

Aetna has also had more difficulty than expected in turning around Prudential Healthcare and NYLCare, two money-losing health insurance companies that it bought last year.

Despite the $70-a-share offer on the table, Donaldson's first order from the executive suite was to hire Robert S. Miller, a turnaround expert. Miller just left insurer Reliance Group Holdings Inc., where he had been president since November. Before that, he served as interim president and chief executive officer of Waste Management Inc., the trash-hauling company.

Outside Aetna's sprawling home office, much of which resembles a Colonial Williamsburg mansion, employees headed home late Wednesday declined to discuss the offer. Most said they did not yet know enough about the situation or were concerned about their own jobs. Others said they had been told not to speak to reporters.

About 11,200 of Aetna's 56,000 employees work in Connecticut.