WellPoint Health Networks has the blues over the delays dogging its pending $500 million acquisition of Blue Cross and Blue Shield of Georgia.
The acquisition of the Atlanta-based Blues plan, announced in July 1998, was initially expected to close by the end of last year, then by summer 1999 (July 13, 1998, p. 12). Now it may drag into 2000.
The transaction bogged down when Cerulean Cos., the Georgia Blues' for-profit parent, determined that 74,000 Georgia Blues policyholders would be ineligible to receive cash or stock in Thousand Oaks, Calif.-based WellPoint when the transaction closes. Cerulean argues that it offered stock to those policyholders, but they either declined the offer or failed to respond before the Blues' conversion to for-profit status in 1996.
The ineligible policyholders filed a lawsuit, and the dispute has bounced between courts in the state.
Wall Street analyst Kenneth Abramo-witz of Sanford C. Bernstein & Co., downplayed the delay. "It just shows how difficult it is to buy a Blue Cross plan," he said. "They'll work it out."
The Georgia Supreme Court ruled in May that only 70,000 Cerulean shareholders who responded to the offer would be eligible to receive about $4,000 each in cash or WellPoint stock.
That decision reversed the Richmond County Superior Court's ruling that the policyholders who didn't respond to the offer were also eligible.
Following the Supreme Court's ruling in May, however, plaintiff attorneys filed an appeal with the Superior Court challenging the state insurance commissioner's ruling in June that only the 70,000 policyholders were eligible.
On Sept. 21, the Superior Court reversed that ruling, saying that the Georgia Blues' conversion to for-profit status required it to offer stock to each eligible policyholder.
Cerulean and the Georgia Blues appealed Oct. 12, maintaining that the Supreme Court decision trumps the lower-court ruling. The Georgia attorney general's office filed a similar appeal Oct. 22.