Three class-action shareholder suits have been filed to halt the proposed merger of WellPoint Health Networks and Health Systems International.
The $4.8 billion merger of the two Woodland Hills, Calif.-based giants would result in the nation's largest publicly traded HMO.
Minority shareholders filed the suits in late March in Los Angeles Superior Court against Leonard D. Schaeffer, board chairman of WellPoint; other directors; and Blue Cross of California. Blue Cross owns 80% of WellPoint.
The shareholders charge that, among other things, WellPoint directors breached their fiduciary duties and abused their power when they rejected bids by the investment firm of Kohlberg Kravis Roberts & Co. and Blue Shield of California to acquire WellPoint.
Because Blue Shield's bid was 45% over the then-market price of WellPoint stock, the proposed deal between WellPoint and HSI "fails to maximize the value of WellPoint's shares," the suits charge.
The proposed merger favors Blue Cross and serves "to entrench the Blue Cross-dominated management of WellPoint," the suits charge.
The shareholders want the court to stop WellPoint from acquiring HSI until it is determined that the proposed deal is in the best interests of shareholders.
Blue Cross will "vigorously defend" itself against the suits, which are "without merit," said Kandy Waldie, WellPoint vice president and assistant general counsel.