The $4.9-billion transaction gives UnitedHealth a chance at the New York metro area as its corporations rev up after the recession.
By Associated Press
Published April 27, 2004
HARTFORD, Conn. - UnitedHealth Group moved to expand its operations in the New York City area, acquiring Oxford Health Plans Inc. on Monday in a stock and cash transaction worth approximately $4.9-billion.
The merger solidifies UnitedHealth's position as one of the nation's largest health insurers, and bolsters the Minneapolis company's business in the lucrative New York metro area.
Oxford, based in Trumbull, Conn., provides health insurance services for about 1.5-million people, mostly in New York City, northern New Jersey and southern Connecticut. United Health serves about 20.2-million customers.
"We believe this is an opportunity which will provide greater choice to current customers of Oxford and United," UnitedHealth spokesman Mark Lindsay said. "Both of them have access to Oxford's superior services and United's national network."
Stephen Hemsley, UnitedHealth's president and chief operating officer, said the company expects to save $80-million to $100-million in operating costs beginning in 2005. He said the company would spend roughly $20-million on the combination, mostly in 2005.
The deal, once completed, should add 16 cents per share to UnitedHealth's earnings, said Dr. William McGuire, chairman and chief executive of UnitedHealth.
The company declined to offer any specifics on any planned job cuts, but McGuire said he does not expect any major layoffs.
The move comes less than a week after Oxford ended talks concerning a possible acquisition by WellChoice Inc., the parent company of New York-area Empire Blue Cross and Blue Shield insurance.
The deal includes UnitedHealth's purchase of approximately 54.7-million shares of Oxford and $1.4-billion in cash.
Oxford shares rose $4.05, or 8 percent, to close at $54.94 Monday on the New York Stock Exchange, and gained 76 cents more in the extended session. UnitedHealth fell $2.05, or 3 percent, at $63.90, and fell 24 cents after-hours.
Hemsley said UnitedHealth has its eye on the more than 90 Fortune 500 companies in New York, New Jersey and Connecticut. The economy in the area was hit hard by the 2001 terrorist attacks and the economic downswing that followed.
"We expect to catch an upswing in that area as the economy strengthens," Hemsley said. Referring to Uniprise, the UnitedHealth unit that handles health benefit services for large companies, he said, "This region is the most opportunity-rich market on Earth, and Oxford has never been in a position to utilize it."
McGuire said the company expects to keep using the Oxford Health brand. The merger is expected to be completed during the fourth quarter of this year.
Both companies informed the state about the merger Monday, Connecticut Insurance Commissioner Susan Cogswell said. The commission is required to have a public hearing before finalizing the deal, she said.
Because Oxford's customer base is limited, the state isn't concerned that the merger would create a monopoly, she said.
"It's combining two quite strong companies. They have different types of business, therefore you'll have one entity providing a wide range of services," she said.
The Oxford merger is one of a handful of UnitedHealth's recent acquisitions.
On April 3, UnitedHealth acquired Touchpoint Health Plan of Wisconsin and its 137,072 customers for $40-million.
UnitedHealth also acquired in November for $500-million cash Golden Rule Financial Corp. of Indianapolis, which offers financial services, life insurance, health insurance and medical savings.
And in October, UnitedHealth paid $2.95-billion for Mid Atlantic Medical Services Inc. in a deal that gave the combined company a leading position in the mid-Atlantic region.