WellPoint dragged into Goldman Sachs suit

Back to TopCommentsE-mailPrintBookmark and Share

WellPoint Inc.’s $4.9 billion offer for Virginia-based Amerigroup Inc. apparently wasn’t the only—or even the most lucrative—bid for the Medicaid managed care company.

But it was the deal most likely to come to fruition before a key deadline for a big payout for Goldman Sachs & Co., according to a shareholder lawsuit filed Aug. 16 against Goldman and the Amerigroup board of directors.

The lawsuit, filed in the Delaware Court of Chancery, alleges that New York-based Goldman Sachs was due to receive $233.7 million from Amerigroup through a complex derivative transaction if it brokered a sale of the company before Aug. 13, according to a report from Reuters.

The lawsuit, filed on behalf of public employee retirement funds in Michigan and Louisiana, says Goldman was due to earn fees of just $18.7 million for its work on the deal itself. It seeks to block the WellPoint-Amerigroup deal from closing until the terms of the agreement are improved.

There was another suitor called Company D in Amerigroup’s narrative of the negotiations, which it disclosed on Aug. 7 in a securities filing. Company D’s offer was higher than WellPoint’s, according to the lawsuit, but faced greater antitrust issues in some states, which would have taken time to work out.

"By recommending a quick deal with WellPoint as opposed to Company D or any of the other interested suitors, Goldman kept alive its chance of receiving a windfall profit on the derivative transaction," states the lawsuit.

The claim received added credibility on Monday when Hartford-based Aetna Inc., a competitor to WellPoint, announced a $5.6 billion deal to acquire Coventry Health Care, a Maryland-based competitor of Amerigroup in the Medicaid managed care business.

WellPoint’s deal for Amerigroup was widely praised by analysts and investors despite the high price, a 43-percent premium over where Amerigroup’s stock was trading before the agreement.

“I’m Gonna Make Him An Offer He Can’t Refuse” is how Citi analyst Carl McDonald titled his report on the deal.

“We don’t anticipate another bidder will top WellPoint’s offer,” McDonald wrote in a research note on July 9, the day the deal was announced. “WellPoint is paying a very full price in this deal, giving Amerigroup credit for much of its anticipated growth over the next few years.”

The $92 per share WellPoint agreed to pay was far higher than its initial offer of $83 per share, but a bit lower than the $93.50 that Amerigroup executives asked for, according to their narrative of the negotiations.

After the U.S. Supreme Court gave states the option not to expand their Medicaid eligibility to include 16 million more Americans, WellPoint countered with an offer of $90 per share. The two companies eventually settled on $92 per share.

The narrative of negotiations states that Amerigroup’s executives drew up presentations on five potential buyers, including WellPoint, and that Amerigroup CEO Jim Carlson approached all of them about some sort of “partnership.” The talks with WellPoint and Company D were the only ones that showed enough interest for Amerigroup’s board to conclude they would lead to an “attractive” purchase offer.

Maureen McDonnell, a spokeswoman for Amerigroup, and Michael DuVally, a Goldman Sachs spokesman, declined to comment to Reuters on Friday. Jill Becher, a spokeswoman for WellPoint, did not respond to Reuters’ requests for comment.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Great article and post scripts by Mike L (Great addition to IBJ BTW). Bobby's stubborn as a mule, and doubt if he ever comes back to IU. But the love he would receive would be enormous. Hope he shows some time, but not counting on it.

  2. When the Indiana GOP was going around the State selling the Voucher bill they were promising people that the vouchers would only be for public charter schools. They lied. As usual.

  3. I am Mr. Morris Ray, a Legitimate And a Reputable money Lender. We lend funds out to individuals in need of financial assistance, we give loan to people that have a bad credit or in need of money to pay bills, to invest on business. Have you been looking for loan? you have not to worry, because you are in the right place i offer loan at low interest rate of 2% so if you are in need of a loan i want you to just contact me via this email Address: morris_ray123@outlook.com

  4. Jim, your "misleading" numbers comment is spot on. This is the spin these posers are putting on it. News flash, fans: these guys lie. They are not publicly traded so no one holds them accountable for anything they say. The TV numbers are so miniscule to begin with any "increase" produces double digit "growth" numbers. It's ridiculous to think that anything these guys have done has awakened the marketplace. What have they done? Consolidate the season so they run more races on consecutive weekends? And this creates "momentum." Is that the same momentum you enjoy when you don't race between August and March? Keep in mind that you are running teams who barely make ends meet ragged over the summer to accomplish this brilliant strategy of avoiding the NFL while you run your season finale at midnight on the East Coast. But I should not obfuscate my own point: any "ratings increase" is exactly what Jim points to - the increased availability of NBC Sports in households. Look fans, I love the sport to but these posers are running it off a cliff. Miles wants to declare victory and then run for Mayor. I could go on and on but bottom line for God's sake don't believe a word they say. Note to Anthony - try doing just a little research instead of reporting what these pretenders say and then offering an "opinion" no more informed than the average fan.

  5. If he's finally planning to do the right thing and resign, why not do it before the election? Waiting until after means what - s special election at tax payer expense? Appointment (by whom?) thus robbing the voters of their chance to choose? Does he accrue some additional financial advantage to waiting, like extra pension payments? What's in it for him? That's the question that needs to be asked.