WLP » Topics » Acquisition of Trigon Healthcare, Inc.

This excerpt taken from the WLP 10-K filed Mar 14, 2005.

Acquisition of Trigon Healthcare, Inc.

 

On July 31, 2002, the Company completed its purchase of 100% of the outstanding stock of Trigon Healthcare, Inc. (“Trigon”). Trigon was Virginia’s largest health care company and was the Blue Cross and Blue Shield licensee in Virginia, excluding the immediate suburbs of Washington, D.C.

 

Trigon’s shareholders each received consideration of thirty dollars in cash and 1.062 shares of the Company’s common stock for each Trigon share outstanding. The purchase price was $4,038.1 and included cash of $1,104.3, the issuance of approximately 39.0 million shares of the Company’s common stock, valued at $2,708.1, Trigon stock options converted into Company stock options for approximately 3.9 million shares, valued at $195.5 and $30.2 of transaction costs. On July 31, 2002, the Company issued $950.0 of long-term senior unsecured notes which were used, along with the sale of investment securities and available cash, to fund the cash portion of the purchase price.

 

In accordance with FAS 141, the purchase price was allocated to the fair value of Trigon assets acquired and liabilities assumed, including identifiable intangible assets. The excess of purchase price over the fair value of net assets acquired resulted in $2,146.1 of non-tax deductible goodwill, which is allocated to the Health Care segment.

 

78


WellPoint, Inc.

 

Notes to Consolidated Financial Statements (continued)

3. Business Combinations (continued)

 

The estimated fair values of Trigon assets acquired and liabilities assumed at the date of acquisition are summarized as follows:

 

Current assets

   $ 1,958.4

Goodwill

     2,146.1

Other intangible assets

     1,172.7

Other noncurrent assets

     208.8
    

Total assets acquired

     5,486.0
    

Current liabilities

     904.2

Noncurrent liabilities

     543.7
    

Total liabilities assumed

     1,447.9
    

Net assets acquired

   $ 4,038.1
    

 

Of the $1,172.7 of acquired intangible assets, $706.4 was assigned to Blue Cross and Blue Shield trademarks, which are not subject to amortization due to their indefinite life. The remaining acquired intangible assets consist of $453.7 of subscriber base with a weighted-average life of 23 years, $8.4 of provider and hospital networks with a 20 year life, and $4.2 of non-compete agreements with a 26 month life.

 

The results of operations for Trigon are included in the Company’s consolidated statement of income after the completion of the acquisition on July 31, 2002.

 

The unaudited pro forma information includes the results of operations for Trigon for the periods prior to the acquisition, adjusted for interest expense on long-term debt and reduced investment income related to the cash and investment securities used to fund the acquisition, additional amortization and depreciation associated with the purchase and the related income tax effects. The unaudited pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations had Trigon been owned by the Company for the full year ended December 31, 2002, nor is it necessarily indicative of future results of operations. The following summary of unaudited pro forma financial information for the year ended December 31, 2002 presents revenues, net income and per share data of WellPoint as if the Trigon acquisition had occurred on January 1, 2002.

 

Revenues

   $ 15,254.5

Net income

     592.0

Pro forma earnings per share:

      

Basic

   $ 4.18

Diluted

   $ 4.07

Pro forma shares outstanding (millions):

    

Basic

   141.5

Diluted

   145.4

 

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