Publicly traded health insurer UICI, North Richland Hills, Texas, agreed to be acquired by a group of private equity firms for about $1.7 billion in cash, or $37 per share. The acquisition will involve a $1 billion equity investment by Blackstone Group, Goldman Sachs Capital Partners and DLJ Merchant Banking Partners; a planned equity investment of more than $125 million by UICI management, employees and agents; and $500 million in bank financing. The deal is expected to close in the first quarter of 2006, pending regulatory approval, receipt of the bank loan and other conditions. Fitch Ratings placed UICI on negative watch, citing the company's increasing debt load. Founded in 1985, UICI sells health insurance, including limited-benefit plans, to individuals and trade associations in 44 states through a network of 4,800 agents. In the first six months of 2005, the company posted net income of $104 million, or $2.20 per share, on revenue of $1.1 billion.
UICI settled a federal class-action lawsuit in May 2004 that challenged the insurer's relationship with the trade associations that market its products, and the company's Mega Life and Health Insurance Co. unit in March of this year was barred from selling new products in Washington state after regulators there discovered Mega's bare-bones policies excluded such state-mandated benefits as emergency services and mammograms. A month later, UICI disclosed that regulators in 23 other states also were reviewing its market conduct. -- by Laura B. Benko