WLP » Topics » Merger with WellPoint Health Networks Inc.

This excerpt taken from the WLP 10-K filed Feb 21, 2008.

Merger with WellPoint Health Networks Inc.

 

On November 30, 2004, Anthem, Inc. and WellPoint Health Networks Inc., or WHN, completed their merger. The merger with WHN helped us to create the nation’s leading health benefits company and the largest holder of Blue Cross and/or Blue Shield licenses in the country. Additionally, our merger with WHN increased our presence in several new strategic markets, most notably California. Under the terms of the merger agreement, the stockholders of WHN (other than subsidiaries of WHN) received consideration of $23.80 in cash and one share of Anthem, Inc. common stock for each WHN share outstanding. In addition, WHN stock options and other awards were converted to WellPoint, Inc. awards in accordance with the merger agreement. The purchase price including cash, fair value of stock and stock awards and estimated transaction costs was approximately $15.8 billion. Anthem, Inc., the surviving corporate parent, was renamed WellPoint, Inc. concurrent with the merger.

 

This excerpt taken from the WLP 10-K filed Feb 26, 2007.

Merger with WellPoint Health Networks Inc.

 

On November 30, 2004, Anthem and WellPoint Health Networks Inc. (“WHN”) completed their merger and Anthem purchased 100% of the outstanding common stock of WHN. WHN merged with and into Anthem Holding Corp., a direct and wholly owned subsidiary of Anthem, with Anthem Holding Corp. as the surviving entity in the merger. In connection with the merger, Anthem amended its articles of incorporation to change its name to WellPoint, Inc. In addition, the ticker symbol for Anthem’s common stock listed on the New York Stock Exchange was changed to “WLP”. WHN’s operating results are included in WellPoint’s consolidated financial statements for the periods following November 30, 2004.

 

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WellPoint, Inc.

 

Notes to Consolidated Financial Statements (continued)

3. Business Combinations (continued)

 

As a result of the merger, each WHN stockholder received twenty-three dollars and eighty cents ($23.80) in cash, without interest, and one share of WellPoint common stock for each share of WHN common stock held. The purchase price was $15,773.6 and included cash of $3,718.8, the issuance of approximately 310.6 shares of WellPoint common stock, valued at $11,293.8, WHN stock options converted to WellPoint stock options and other stock awards for approximately 43.7 shares, valued at $563.6, and $197.4 of transaction costs. The fair value of common stock issued was based on $36.35 per share, which represents the average closing price of the Company’s common stock for the five trading days ranging from two days before to two days after October 27, 2003, the date the merger was announced.

 

In accordance with FAS 141, the purchase price was allocated to the fair value of WHN assets acquired and liabilities assumed, including identifiable intangible assets. The excess of purchase price over the fair value of net assets acquired resulted in $7,626.4 of non-tax deductible goodwill, of which $7,397.6 was allocated to the Health Care segment and $228.8 to the Specialty segment.

 

The fair values of WHN assets acquired and liabilities assumed at the date of the merger, adjusted for final purchase price allocations, are summarized as follows:

 

Current assets

  $  11,381.6

Goodwill

    7,626.4

Other intangible assets

    7,031.7

Other noncurrent assets

    1,100.5
     

Total assets acquired

    27,140.2

Current liabilities

    6,969.2

Noncurrent liabilities

    4,397.4
     

Total liabilities assumed

    11,366.6
     

Net assets acquired

  $ 15,773.6
     

 

Of the $7,031.7 of acquired intangible assets, $4,370.0 was assigned to Blue Cross and Blue Shield and other trademarks, $271.0 was assigned to provider networks, and $258.0 was assigned to a license for a state sponsored program, which are not subject to amortization due to their indefinite life. The remaining acquired intangible assets consist of $2,030.0 of subscriber base with an average life of 20 years and $102.7 of provider contracts with a 23 year life. The values assigned to goodwill and intangible assets with finite and indefinite lives were determined based on independent third-party valuations.

 

In connection with the WHN merger, the Company executed certain undertakings with the California Department of Managed Health Care, the California Department of Insurance (“California DOI”), and the Georgia Department of Insurance (“Georgia DOI”), which contained various commitments by the Company. Expenses for merger related undertakings of $61.5 were recorded in 2004 for certain obligations under these agreements with the California DOI and the Georgia DOI. Under these obligations, during 2005, WellPoint donated $35.0 to community clinics in California and $15.0 for a program to be conducted through California community colleges to support the training of new nurses in California. Further, Blue Cross and Blue Shield of Georgia, Inc. and Blue Cross and Blue Shield Healthcare Plan of Georgia, Inc., are funding the establishment and administration of a telemedicine network to benefit health care in rural Georgia under the $11.5 commitment established in connection with the WHN merger.

 

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WellPoint, Inc.

 

Notes to Consolidated Financial Statements (continued)

3. Business Combinations (continued)

 

The unaudited pro forma information includes the results of operations for WHN for the periods prior to the merger, 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 WHN been owned by WellPoint for the full year ended December 31, 2004, nor is it necessarily indicative of future results of operations.

 

The following summary of unaudited pro forma financial information presents revenues, net income and per share data of WellPoint for the year ended December 31, 2004 as if the WHN merger had occurred on January 1, 2004.

 

Pro forma revenues

  $  42,124.0

Pro forma net income

  $ 1,910.3

Pro forma earning per share:

 

Basic

  $ 3.10

Diluted

  $ 3.00

Pro forma shares outstanding:

 

Basic

    615.9

Diluted

    636.8

 

This excerpt taken from the WLP 10-K filed Feb 23, 2006.

Merger with WellPoint Health Networks Inc.

 

As described in Note 1, on November 30, 2004, Anthem completed its merger with WHN and purchased 100% of the outstanding common stock of WHN. As a result of the merger, each WHN stockholder received twenty-three dollars and eighty cents ($23.80) in cash, without interest, and one share of WellPoint common stock for each share of WHN common stock held. The purchase price was $15,773.6 and included cash of $3,718.8, the issuance of approximately 310.6 shares of WellPoint common stock, valued at $11,293.8, WHN stock options converted to WellPoint stock options and other stock awards for approximately 43.7 shares, valued at $563.6, and $197.4 of estimated transaction costs. The fair value of common stock issued was based on $36.35 per share, which represents the average closing price of the Company’s common stock for the five trading days ranging from two days before to two days after October 27, 2003, the date the merger was announced.

 

In accordance with FAS 141, the purchase price was allocated to the fair value of WHN assets acquired and liabilities assumed, including identifiable intangible assets. The excess of purchase price over the fair value of net assets acquired resulted in $7,626.4 of non-tax deductible goodwill, of which $7,397.6 was allocated to the Health Care segment and $228.8 to the Specialty segment.

 

The estimated fair values of WHN assets acquired and liabilities assumed at the date of the merger, adjusted for final purchase price allocations, are summarized as follows:

 

Current assets

  $  11,381.6

Goodwill

    7,626.4

Other intangible assets

    7,031.7

Other noncurrent assets

    1,100.5
   

Total assets acquired

    27,140.2
   

Current liabilities

    6,969.2

Noncurrent liabilities

    4,397.4
   

Total liabilities assumed

    11,366.6
   

Net assets acquired

  $ 15,773.6
   

 

Of the $7,031.7 of acquired intangible assets, $4,370.0 was assigned to Blue Cross and Blue Shield and other trademarks, $271.0 was assigned to provider networks, and $258.0 was assigned to a license for a state sponsored program, which are not subject to amortization due to their indefinite life. The remaining acquired intangible assets consist of $2,030.0 of subscriber base with an average life of 20 years and $102.7 of provider contracts with a 23 year life. The values assigned to goodwill and intangible assets with finite and indefinite lives were determined based on independent third-party valuations.

 

The results of operations for WHN are included in WellPoint’s consolidated financial statements for the periods following November 30, 2004.

 

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Notes to Consolidated Financial Statements (continued)

3. Business Combinations (continued)

 

In connection with the WHN merger, the Company executed certain undertakings with the California Department of Managed Health Care, the California Department of Insurance (“California DOI”), and the Georgia Department of Insurance (“Georgia DOI”), which contained various commitments by the Company. Expenses for merger related undertakings of $61.5 were recorded in 2004 for certain obligations under these agreements with the California DOI and the Georgia DOI. Under these obligations, during 2005, WellPoint donated $35.0 to community clinics in California and $15.0 for a program to be conducted through California community colleges to support the training of new nurses in California. Further, Blue Cross and Blue Shield of Georgia, Inc. and Blue Cross and Blue Shield Healthcare Plan of Georgia, Inc., started to fund the establishment and administration of a telemedicine network to benefit health care in rural Georgia under the $11.5 commitment established in connection with the WHN merger.

 

The unaudited pro forma information includes the results of operations for WHN for the periods prior to the merger, 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 WHN been owned by WellPoint for the full years ended December 31, 2004 and 2003, nor is it necessarily indicative of future results of operations.

 

The following summary of unaudited pro forma financial information presents revenues, net income and per share data of WellPoint as if the WHN merger had occurred on January 1, 2003.

 

    Years Ended December 31

    2004

   2003

Pro forma revenues

  $ 42,124.0    $ 37,234.9

Pro forma net income

  $ 1,910.3    $ 1,496.8

Pro forma earning per share:

            

Basic

  $ 3.10    $ 2.55

Diluted

  $ 3.00    $ 2.49

Pro forma shares outstanding:

            

Basic

    615.9      587.2

Diluted

    636.8      600.6

 

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

Merger with WellPoint Health Networks Inc.

 

As described in Note 1, on November 30, 2004, Anthem completed its merger with WHN and purchased 100% of the outstanding common stock of WHN. As a result of the merger, each WHN stockholder received

 

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WellPoint, Inc.

 

Notes to Consolidated Financial Statements (continued)

3. Business Combinations (continued)

 

$23.80 in cash, without interest, and one share of WellPoint common stock for each share of WHN common stock held. The purchase price was $16,022.3 and included cash of $3,718.8, the issuance of approximately 155.3 million shares of WellPoint common stock, valued at $11,293.8, WHN stock options converted to WellPoint stock options and other stock awards for approximately 21.8 million shares, valued at $806.3 and $203.4 of estimated transaction costs. The fair value of common stock issued was based on $72.70 per share, which represents the average closing price of the Company’s common stock for the five trading days ranging from two days before to two days after October 27, 2003, the date the merger was announced.

 

As further described in Note 6, on November 30, 2004, the Company borrowed $500.0 under its bridge loan facility, $900.0 under a 364-day facility and $1,400.0 under a five year senior credit facility to partially fund the cash portion of the purchase price. The remainder of the cash portion of the purchase price was funded through the sale of investment securities and from available cash. Debt of $2,800.0 initially incurred with the WHN merger was reduced to $1,893.2 at December 31, 2004.

 

In accordance with FAS 141, the purchase price was allocated to the fair value of WHN assets acquired and liabilities assumed, including identifiable intangible assets. The excess of purchase price over the fair value of net assets acquired resulted in $7,579.6 of estimated non-tax deductible goodwill, of which $7,200.6 was allocated to the Health Care segment and $379.0 to the Specialty segment. The purchase price allocation is preliminary and additional refinements may occur, including the completion of final third-party valuations of certain intangible assets.

 

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

 

Current assets

  $ 11,359.7

Goodwill

    7,579.6

Other intangible assets

    7,046.0

Other noncurrent assets

    1,123.0
   

Total assets acquired

    27,108.3
   

Current liabilities

    6,949.7

Noncurrent liabilities

    4,136.3
   

Total liabilities assumed

    11,086.0
   

Net assets acquired

  $ 16,022.3
   

 

Of the $7,046.0 of acquired intangible assets, $4,370.0 was assigned to Blue Cross and Blue Shield trademarks, $295.0 was assigned to provider networks, and $251.0 was assigned to a license for a state sponsored program, which are not subject to amortization due to their indefinite life. The remaining acquired intangible assets consist of $2,030.0 of subscriber base with an average life of 20 years and $100.0 of provider contracts with a 30 year life.

 

The results of operations for WHN are included in WellPoint’s consolidated financial statements for the period following November 30, 2004.

 

In connection with the WHN merger, the Company executed certain undertakings with the California Department of Managed Health Care, the California Department of Insurance (“California DOI”), and the

 

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WellPoint, Inc.

 

Notes to Consolidated Financial Statements (continued)

3. Business Combinations (continued)

 

Georgia Department of Insurance (“Georgia DOI”) which contained various commitments by the Company. Expenses for merger related undertakings of $61.5 were recorded in 2004 for certain obligations under our agreements with the California DOI and the Georgia DOI. Specifically, WellPoint committed to donations of $35.0 to community clinics in California and $15.0 for a program to be conducted through California community colleges to support the training of new nurses in California. Further, Blue Cross and Blue Shield of Georgia, Inc. and Blue Cross and Blue Shield Healthcare Plan of Georgia, Inc., committed to spend $11.5 for the establishment and administration of a telemedicine network to benefit health care in rural Georgia.

 

The unaudited pro forma information includes the results of operations for WHN for the periods prior to the merger, 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 WHN been owned by WellPoint for the full years ended December 31, 2004 and 2003, nor is it necessarily indicative of future results of operations. The following summary of unaudited pro forma financial information presents revenues, net income and per share data of WellPoint as if the WHN merger had occurred on January 1, 2003.

 

    Year Ended December 31

    2004

   2003

Revenues

  $ 42,134.1    $ 37,234.9

Net income

    1,918.6      1,504.1

Pro forma earnings per share:

            

Basic

  $ 6.52    $ 5.12

Diluted

  $ 6.31    $ 4.97

Pro forma shares outstanding (millions):

            

Basic

    294.4      293.6

Diluted

    303.9      302.6

 

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