Health care provider WellPoint has made a $4.46 billion bet on healthcare expansion following the recent Supreme Court ruling that upheld most of Obamacare. Reuters announced that WellPoint (WLP) will buy competitor Amerigroup (AGP) for $92 a share, a 43% premium from its closing price Friday.
The acquisition by WellPoint focuses on the expansion of Medicaid to the poor. Under the new healthcare system, 30 million Americans would possess health insurance. WellPoint and Amerigroup are expecting to provide their combined business to 4.5 million new customers as a result of state-sponsored healthcare plans.
WellPoint hopes to be an industry leader when it comes to serving Medicare and Medicaid clients. The deal is expected to be completed in the opening quarter of 2013. WLP’s earnings per share is expected to rise by more than $1 by 2015 to a total of $9.63 a share, pending the completion of the deal.
Political Implications
WellPoint claims they would have done the deal regardless of the Supreme Court ruling, but one can’t help but wonder what this deal would mean if Mitt Romney is elected and holds his promise to repeal Obamacare. Surely Medicare and Medicaid would not gain maintain the millions of new participants if Romney were to successfully repeal the healthcare reform act.
Business Section: Investing Ideas
The markets seem hopeful. In early morning trading Monday, WLP was up 3%, and AGP was up 38%. Although WLP was slightly down on Tuesday open and AGP is trading up 0.6%.
Thomas Carroll, a Stifel Nicolaus & Co. analyst predicted that other Medicare and Medicaid providers would see a stock increase following the announcement, and they did. On Monday WellCare Health Plans (WCG) was up 14%, Molina Healthcare (MOH) was up 13.5%, and Centene Corp (CNC) rose 19%. Clearly the WellPoint bet on increased Medicaid gave confidence to investors towards all health insurance companies with customers reliant on these government-sponsored plans.
Listed below are companies who compete against WellPoint. All but Humana (HUM) saw price increases on Monday morning trading following the news. Do you think that these companies will see increases in profits following their potential new customers, or will the upcoming elections prove that this deal was a bad bet for WellPoint? It might be a good idea to bring this list back up if Romney takes the White House.
Use the Turbo Chart to analyze the price movement of WCG, AGP, and WLP over the last month:
1. WellPoint Inc. (WLP, Earnings, Analysts, Financials): Operates as a health benefits company in the United States. Market cap at $23.09B, most recent closing price at $69.80.
2. AMERIGROUP Corporation (AGP, Earnings, Analysts, Financials): Operates as a multi-state managed healthcare company. Market cap at $2.92B, most recent closing price at $60.27.
3. WellCare Health Plans, Inc. (WCG, Earnings, Analysts, Financials): Provides managed care services for government-sponsored healthcare programs in the United States. Market cap at $2.18B, most recent closing price at $50.67.
4. Molina Healthcare Inc. (MOH, Earnings, Analysts, Financials): Provides Medicaid-related solutions to meet the health care needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program. Market cap at $1.04B, most recent closing price at $22.35.
5. Centene Corp. (CNC, Earnings, Analysts, Financials): Operates as a multiline healthcare company in the United States. Market cap at $1.45B, most recent closing price at $28.20.
6. Aetna Inc. (AET, Earnings, Analysts, Financials): Operates as a diversified health care benefits company in the United States. Market cap at $14.42B, most recent closing price at $41.50.
7. Cigna Corp. (CI, Earnings, Analysts, Financials): Operates as a health service organization. Market cap at $13.01B, most recent closing price at $45.12.
8. Coventry Health Care Inc. (CVH, Earnings, Analysts, Financials): Operates as a managed healthcare company in the United States. Market cap at $4.68B, most recent closing price at $32.73.
9. Health Net, Inc. (HNT, Earnings, Analysts, Financials): Provides managed health care services through its health plans and government-sponsored managed care plans. Market cap at $2.03B, most recent closing price at $24.34.
10. Magellan Health Services Inc. (MGLN, Earnings, Analysts, Financials): Provides managed behavioral healthcare, radiology benefits management, specialty pharmaceutical management, and Medicaid administration products and services in the United States. Market cap at $1.14B, most recent closing price at $41.73.
11. Unitedhealth Group, Inc. (UNH, Earnings, Analysts, Financials): Provides healthcare services in the United States. Market cap at $61.47B, most recent closing price at $59.25.
12. Universal American Corp (UAM, Earnings, Analysts, Financials): Provides health insurance and managed care products and services primarily to the senior population in the United States. Market cap at $926.29M, most recent closing price at $10.83.
13. Humana Inc. (HUM, Earnings, Analysts, Financials): Offers various health and supplemental benefit plans in the United States. Market cap at $12.89B, most recent closing price at $79.02.
Written by Ryan Horch
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Dig Deeper: Access Company Snapshots, Charts, Filings
- WellPoint Inc. (WLP, Chart, Download SEC Filings)
- AMERIGROUP Corporation (AGP, Chart, Download SEC Filings)
- WellCare Health Plans, Inc. (WCG, Chart, Download SEC Filings)
- Molina Healthcare Inc. (MOH, Chart, Download SEC Filings)
- Centene Corp. (CNC, Chart, Download SEC Filings)
- Aetna Inc. (AET, Chart, Download SEC Filings)
- Cigna Corp. (CI, Chart, Download SEC Filings)
- Coventry Health Care Inc. (CVH, Chart, Download SEC Filings)
- Health Net, Inc. (HNT, Chart, Download SEC Filings)
- Magellan Health Services Inc. (MGLN, Chart, Download SEC Filings)
- Unitedhealth Group, Inc. (UNH, Chart, Download SEC Filings)
- Universal American Corp (UAM, Chart, Download SEC Filings)
- Humana Inc. (HUM, Chart, Download SEC Filings)
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