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The Daily News of Los Angeles
Oct 28, 2004
by Brent Hopkins, Staff Writer
FIRMS CONFIDENT OF MERGER;
WELLPOINT, ANTHEM BID STILL RAISES CONCERNSWith both WellPoint Health Networks Inc. and Anthem Inc. reporting solid third quarters this week, the two insurers profess confidence in the future of their proposed merger - but regulators aren't so sure.
The Indiana-based Anthem said Wednesday that its earnings climbed 23 percent in the quarter, while Thousand Oaks' WellPoint reported profits were up 28 percent in the same period on Tuesday. Anthem Chairman and Chief Executive Officer Larry Glasscock said Wednesday that the firms are actively pursuing the merger, stalled as the companies spar in court with California Insurance Commissioner John Garamendi.
Garamendi has prevented Anthem from taking over Blue Cross of California, saying the deal will hurt Californians, leading Anthem to sue to keep the deal alive. The trial begins in February.
Glasscock said his company had devised more than 300 initiatives and spent $18.6 million so far to integrate the two companies and reiterated his desire to move ahead with the deal on Wednesday.
"In addition to the lawsuit we filed on Aug. 4, 2004, we continue to evaluate all options available to us to complete this transaction," he said in a conference call. "We remain committed to the merger and will work diligently toward completing it."
Garamendi spokesman Norman Williams declined to comment on the pending suit, which challenges his authority to block a sale.
The Department of Insurance stood as the last hurdle before the deal cleared, but its opposition has since raised questions from regulators who'd previously signed off. Missouri, Georgia and Texas have all asked for more information on the deal after previously approving the $16 billion deal.
"We've got an order here that's pretty stale," said Danny Saenz, deputy commissioner for the Texas Department of Insurance. "It'll be almost a year old by the time the case gets to the court in February, so we may decide it isn't good for us to go with. We may rescind it and make them go through the process again."
That may not be the only hoop the companies must jump through, according to the Santa Monica-based Foundation for Taxpayer and Consumer Rights, a frequent critic of the merger.
"Even if they win in court, every state will have to take a second look," said Jamie Court, president of the nonprofit group. "I'm not saying they won't all approve it, but this thing is far from a done deal, like they're telling investors."
WellPoint CEO Leonard Schaffer said the company would work with various regulators to answer whatever questions have arisen on the long- delayed merger.
"It has always been our understanding that every state has a regulatory duty to ensure that the deal they approved is the deal that gets done," he said in a statement. "We will continue to respond to regulatory agencies concerning any questions they may have about the merger."
Given the magnitude of the deal, analyst Dr. Curt Morrison of Morningstar figures both companies will fight hard to seal it. Given that both are performing quite well independently, he said that even if they fail to consummate the merger, they should continue smoothly on their own.
"Certainly, if other regulators jump on the bandwagon, it would make the merger less likely," said Morrison, an equities analyst and cardiologist. "Either company would do fine on their own ... I'm never one to assume everything will go as smoothly as planned, so my opinion on the companies doesn't hinge on whether it's completed or not."
Anthem saw revenue climb to $4.8 billion with earnings of $242.1 million, $1.70 per share, in the third quarter, up from revenue of $4.3 billion, $196.5 million, $1.38 per share in the same period a year ago. Its stock gained $4.28 to close at $81.12 on Wednesday.
WellPoint's third quarter revenue rose to $5.85 billion from $5.05 billion a year ago. Earnings were up to $315 million, $1.97 per share, from $246 million, $1.63 per share, a year ago. Shares advanced $4.11 to close at $97.01 on Wednesday.
Contact the author Brent Hopkins at: (818) 713-3738 or firstname.lastname@example.org
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