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WellPoint Preps for Medicaid Expansion with Acquisition


With an eye on the future changes of Medicaid, WellPoint agreed to buy Amerigroup Corp. to expand the company's managed care for patients in both the Medicaid and the Medicare programs.

Less than two weeks ago, when the Supreme Court upheld the Affordable Care Act (ACA), it also upheld plans to expand Medicaird by 17 million people. With an eye on the future changes of Medicaid, WellPoint agreed to buy Amerigroup Corp.

The $4.9 billion deal will expand the company’s managed care for patients in both the Medicaid and the Medicare programs. As a result of the implementation of ACA, companies in areas like hospitals and Medicaid are expected to see big gains.

WellPoint is clearly trying to get in front of the big changes that are likely to come over the next few years. Although the Court ruling means Medicaid will expand, it simultaneously weakened the administration because it said states could not be penalized for not complying.

We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees,” Angela F. Braly, president and chief executive officer of WellPoint, said in a statement.

Before the opening bell, Amerigroup was one of the most active stocks, up 37.92% while the rest of the stock market opened flat. WellPoint was up 4% at the opening bell, trading at $62.31.

Amerigroup Corporation at 10:00 a.m.

WellPoint Inc. at 10:00 a.m.

The combined company’s Medicaid footprint will include 19 states. The acquisition is expected to close in the first quarter of 2013 and will be paid for by cash on hand, commercial paper and by selling new debt.

WellPoint will pay $92 per share in cash to acquire Amerigroup’s outstanding shares, which was 43% above the closing price on July 6. At 10 a.m. on Monday, the stock was still trading below the offer price at $88.75.

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock.

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