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Jun 29, 2004
by JEFF SWIATEK
Shareholders quickly OK Anthem deal
WellPoint merger gets approval from 97% of two firms' investors; California is final hurdle.Shareholders Monday overwhelmingly approved Anthem Inc.'s $16.4 billion takeover of WellPoint Health Networks, and now the health care mega-merger faces one final hurdle: California regulators.
Talks will pick up this week, to try to reach agreements on structuring the deal to the satisfaction of regulators looking out for the welfare of more than 7 million Californians who hold WellPoint policies.
Today, California legislative staff will be briefed on a proposal to require Anthem to invest in health care coverage for low-income children in the state. "We'll see what we want to do. We're going to be pursuing that," said Saeed Ali, chief of staff for California Assemblyman Manny Diaz (D-San Jose).
Nearly 97 percent of voting shares at Anthem and WellPoint were cast in favor of the deal, despite well-publicized opposition to the merger by several large public pension funds and state treasurers.
"By any measure, this is overwhelming support to get this done," said Anthem's Chairman, President and Chief Executive Larry C. Glasscock.
It was also a surprisingly discussion-free affair. Not a single shareholder at either company's special meetings spoke up during the discussion periods. The meetings were held simultaneously in Indianapolis, at Anthem's headquarters on Monument Circle, and in a hotel near WellPoint's headquarters in Thousand Oaks, Calif.
Each meeting lasted only about 15 minutes. Anthem shareholders voted on issuing 158 million new shares to buy WellPoint, and changing the corporate name to WellPoint Inc. WellPoint shareholders voted on whether to exchange their shares for an equal number of Anthem shares, plus $23.80 in cash per share.
Anthem shareholder Bryan Avery, an Indianapolis banker, said he attended in order to vote in person because he was too late mailing in his ballot.
"I don't actually own enough shares to make a difference. The shares that make a difference are right there," he said, pointing to Anthem's directors in the front two rows of the meeting room.
Actually, more than 80 percent of Anthem's shares are owned by institutions, such as stock funds.
A done deal still will require approval from the largest and last state to weigh in.
Anthem won't put in place its complex integration plan for the two firms' operations until after two California regulatory agencies have approved the deal, Glasscock said.
Nine other states and Puerto Rico have approved the merger, which will create the nation's largest health benefits firm.
Anthem, which will put the combined company's headquarters in Indianapolis, still hopes to complete the merger by midyear, Glasscock said, declining to be more specific.
A California consumer group, which has criticized bonus and severance payouts of $147 million to $356 million that WellPoint executives would collect in the merger, called Monday for California regulators to require Anthem to refund $1 billion to policyholders if it's allowed to take over WellPoint.
The amount represents the reserves that WellPoint's Blue Cross unit has set aside from premium income, said the Foundation for Taxpayer and Consumer Rights.
At a public hearing on the merger last week, California Insurance Commissioner John Garamendi suggested Anthem invest up to $400 million to help provide insurance coverage for low-income children.
Officials of Anthem and WellPoint are willing to consider making a public service investment, as part of doing the merger, said Ken Ferber, a WellPoint spokesman.
"It's an investment, not a donation, that we're looking at," he said. "We're going to be discussing that with the commissioner's office."
As part of its conversion into a for-profit company in 1996, WellPoint gave $3 billion to create two independent California health care foundations.
Besides Garamendi, the California Department of Managed Health Care holds a say over the merger. It has scheduled a public hearing July 9. Some analysts expect a decision to come two to four weeks later.
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