Health Foundation will reap $256 million from Cobalt acquisition
The Wisconsin United for Health Foundation will receive approximately $256 million in cash to promote the health care of Wisconsin residents after Cobalt Corp. is acquired by the nation’s second-largest health insurer.
Milwaukee-based Cobalt announced Tuesday it has agreed to be acquired by WellPoint Health Networks Inc. in a transaction valued at about $906 million.
The acquisition will result in the Wisconsin United for Health Foundation, a nonprofit corporation created to promote the general health, welfare and common good of Wisconsin residents, receiving a cash windfall and 3.1 million shares of WellPoint common stock.
The funds will solely be used to support public health initiatives to be developed by the Medical College of Wisconsin in Milwaukee and the University of Wisconsin Medical School in Madison.
The two schools will split the cash windfall evenly, according to a spokeswoman for the Medical College of Wisconsin.
The foundation owns approximately 60 % of the outstanding shares of Cobalt and has agreed to vote in favor of the acquisition.
The transaction will result in Milwaukee losing the corporate headquarters of another publicly traded company.
However, WellPoint and Cobalt officials said Milwaukee will continue to be the headquarters for Blue Cross & Blue Shield United of Wisconsin and the national headquarters for the combined company’s Medicare Part A claim processing business. Currently, more than 600 employees work in that division at Cobalt’s downtown Milwaukee offices, located at 401 W. Michigan St.
Cobalt is the Blue Cross & Blue Shield health insurance licensee for Wisconsin.
Cobalt’s health maintenance organizations (HMOs) — Compcare Blue, Unity Health Plans and Valley Health Plans – cover about 300,000 members in Wisconsin.
Cobalt is the state’s largest HMO. Cobalt also provides point-of-service (POS) plans, specialty health care products and related administrative service.
After the acquisition was announced, shares of Cobalt’s common stock rose to $20.46, up $2.51, in trading Wednesday morning.
Small Business Times first reported last September that Cobalt could become a takeover target by WellPoint, based on speculation by Robert W. Baird & Co. analyst Craig Kennison.
“Cobalt also may be in an enviable market position, in that it is one of just three publicly held companies in the Blue Cross & Blue Shield network of 43 companies,” SBT reported Sept. 27, 2002. “That could make Cobalt a takeover target of WellPoint Health Networks of Thousand Oaks, Calif., and Anthem Inc. of Indianapolis, Ind., which have been buying up the publicly traded blues affiliates, Kennison said.”
The SBT report noted that Cobalt was one of the top 20 performing U.S. stocks since the previous year’s 9-11 terrorist attacks, based on a review of stocks for companies with a minimum market capitalization of $25 million and a minimum share price of $5. At that time, Cobalt’s shares had risen 173 % to $18.10.
Cobalt’s recent successes came after some corporate hiccups. The company had withdrawn a proposed secondary stock offering last August, due unfavorable market conditions. Cobalt also announced plans to close its claims and customer service departments in Stevens Point and Evansville, eliminating 176 jobs, after the firm lost $140 million from 19999 through 2001.
Cobalt bounced back to compile a net income of $73.9 million in 2002.
In announcing the acquisition Tuesday, Cobalt and WellPoint officials did not specifically address the impact the merger will have on the number of employees in Milwaukee.
A conference call with the media involving Cobalt chief executive officer Stephen Bablitch and WellPoint CEO Leonard Schaeffer is scheduled for Wednesday afternoon.
“I am convinced that this merger will be good for our customers, the policy holders, our employees and our shareholders, and will enable the Wisconsin United for Health Foundation to advance public health in the state,” Bablitch said.
“With a common blue brand heritage and similar member-focused business philosophies, the combined organization will be well-positioned to grow significantly in Wisconsin,” Schaeffer said.
The acquisition marks the continued growth of WellPoint, which is ranked #103 on Fortune magazine’s 2003 Fortune 500 list of America’s largest corporations.
Small Business Times, June 4, 2003, By Steve Jagler, executive editor