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WellPoint dragged into Goldman Sachs suit

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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.

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  1. "This was a very localized, Indiana issue," he said. As in, Indiana failed to expand Medicaid to cover its poor citizens resulting in the loss of essential medical services, including this EMS company. Well done, Indiana GOP. Here are the real death panels: GOP state governments who refuse to expand Medicaid for political reasons.

  2. In the "one for all, all for none" socialist doctrine the sick die...this plus obama"care" equates to caucasian genocide plus pushed flight to cities thus further eroding the conservative base and the continualed spiral toward complete liberal/progressive/marxist America.

  3. There is a simple reason why WISH is not reporting on this story. LIN has others stations in different markets that are affiliated with CBS. Reporting about CBS blindsiding WISH/LIN due to CBS's greed and bullying tatics would risk any future negoations LIN will have with CBS in other markets.

  4. My best always! Dave Wilson

  5. How did Columbus, Ohio pull off a car share service without a single dollar of public subsidies? They must not have a mayor who is on the take like Indianapolis. Daimler Benz offers Columbus residents their Smart Cars on a market-driven basis: "This has some neat features. Cars don’t have to be picked up and dropped off at fixed points. You find one with your smart phone based on GPS, and drop it off anywhere in the service area you can find a spot – even at a meter. These cars aren’t required to feed the meter so you get free on street parking while using them. I was told this system was put in place on a market basis without subsidies – and that the vendor actually pays the city for the use of the meters." http://www.urbanophile.com/2014/05/26/checking-in-on-columbus/

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