MINNEAPOLIS -- United HealthCare Corp. said Thursday it has agreed to acquire HMO America, which operates a 300,000-member Chicago- area health plan, for some $415 million in stock.
News of the deal sent HMO America stock soaring $7.875 a share to close at $35 on the New York Stock Exchange on a day when most issues fell. United HealthCare closed unchanged at $56.75 a share on the NYSE.
The two companies expect to close the deal by mid-September, assuming approval from regulatory agencies and HMO America stockholders.
Following completion of the merger, United HealthCare will have the largest managed-care system in greater Chicago. The suitor already owns Share Illinois, a 97,300-member Chicago-area plan, while HMO America operates Chicago HMO Ltd., the area's second-largest HMO.
United HealthCare management added that Chicago-based HMO America has 16 years' experience with one of the nation's largest Medicaid-patient populations.
Minneapolis-based United HealthCare is already the nation's largest multi-state managed-care provider for Medicaid populations, but does not now have a Chicago Medicaid program.
'We feel HMO America will be an excellent addition to our company's network of health plans,' United HealthCare Chairman William McGuire said. 'We're committed to building on HMO America's success in the Chicago market, and we believe United HealthCare's extensive range of specialized cost- and quality-management capabilities and information systems will bring important added value to HMO America's members, providers and customers.'
HMO America President Robert Weinstein said his company represented a strong fit for United HealthCare.
'United HealthCare shares our commitment to consumers, purchasers and providers of health care services. We're pleased to be joining forces with this respected national leader as we continue to grow our managed care programs,' he said.
Thursday's deal calls for investors to receive 0.64 shares of United HealthCare stock for each HMO America share they own. HMO America has approximately 10.2 million shares of common and preferred stock outstanding, plus approximately 1.3 million options to acquire common stock.
United HealthCare said it plans to file a registration statement soon with the Securities and Exchange Commission, and will apply to the New York Stock Exchange to list shares of common stock it plans to issue for the transaction.
The two companies said they consider the deal a pooling of interests, which should be tax-free to shareholders.
United HealthCare offers a broad range of products through 20 locally based health plans and nine non-geographically bounded specialty-care management companies.
Services offered include HMOs (health-maintenance organzations), PPOs (preferred-provider organizations), health-plan management, pharmaceutical-cost management, managed mental-health and substance- abuse services, workers compensation/casualty services, specialized provider networks, Medicare and managed-care programs for the aged, health-care evaluation services and other products.
HMO America owns and operates the second-largest HMO in the Chicago area, as well as a related insurance company.
