Tuesday, April 30, 2002

Anthem Inc. to buy Trigon for $4 billion

By Michael Buettner
The Associated Press

        RICHMOND, Va. — The managed health care provider Trigon Healthcare Inc. Monday said it has agreed to be acquired by Indianapolis-based Anthem Inc. for about $4 billion in cash and stock.

        Both companies are former nonprofit Blue Cross Blue Shield providers that operate now as for-profit corporations and have a combined total of about 10 million members. Anthem Blue Cross and Blue Shield provides coverage for about 400,000 Greater Cincinnati residents.

        The merged company would rank as the nation's fourth-largest among publicly traded managed-care health insurance companies, according to Atlantic Information Services, which tracks health-care industry information.

        Trigon shares leapt $14.62 a share, to $98.87 in trading on the New York Stock Exchange, while Anthem shares fell $4.05 a share to $66.65.

        By acquiring Richmond-based Trigon, Anthem will gain its first foothold in the southeastern United States, along with Trigon's expertise in selling specialty insurance products such as dental and life insurance plans, said Larry Glasscock, president and chief executive of Anthem.

        Trigon chairman and chief executive Tom Snead lauded Anthem's investment management methods and ability to make acquisitions pay off.

        Trigon has about 2.2 million members and posted revenue of $3 billion in 2001. Anthem has about 8 million members and reported $10.1 billion in revenue last year.

        The deal is expected to close in three to six months, subject to regulatory approvals. After the merger, three members of Trigon's board of directors will be named to Anthem's board, and Trigon's operations will be treated as a new regional division of Anthem.

        Anthem is offering Trigon stockholders $30 in cash and 1.062 Anthem shares for each share of Trigon stock they own.

        David Frick, Anthem's chief legal and administrative officer, said the proposal includes a provision allowing Trigon to call off the deal if Anthem's stock price falls below $55 a share and also falls 15 percent below an index of large managed-care companies. Anthem would have the option to raise its bid under those circumstances.

        Glasscock said his company will have to borrow about $1.2 billion to cover the total cost of the merger. He said Anthem has discussed its debt position with some of the bond-rating agencies and has been told that “a senior debt offering by Anthem would have an investment-grade rating.”

        The proposed deal requires approval by shareholders of both companies and must be approved by the Virginia Bureau of Insurance. While no one commented on the prospects for state approval, Glasscock earlier noted that Kansas insurance regulators are opposing Anthem's acquisition of that state's former Blue Cross Blue Shield provider.

        Much of the benefit the companies foresee in combining will come from elimination of duplicate functions. Anthem said it expects to realize $40 million before taxes next year and $75 million in 2004 from these benefits, with two-thirds of the total coming from cost-cutting measures, possibly including elimination of some jobs.

        Trigon employs about 4,100 people, while Anthem has about 14,800 employees.


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