Bill would kill CareFirst deal, insurer warns House panel

Senate measure to bar breakup fee to WellPoint

April 03, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

A representative of CareFirst BlueCross BlueShield told House committee members yesterday that if they want to kill the insurer's proposed conversion to a for-profit company, all they have to do is pass Senate Bill 592.

That legislation, sponsored by Sen. Robert R. Neall and already passed by the Senate, would ban the payment of a breakup fee to WellPoint Health Networks Inc. in the event that CareFirst calls off its $1.3 billion acquisition by the California company in favor of another bidder.

David M. Funk, CareFirst's lead counsel in the state insurance commissioner's hearings on the deal, told the House panel that passage of the bill with the breakup fee provision would not only scuttle the WellPoint deal but would also prevent any other company from buying the health insurer.

"It will just prevent the acquisition of CareFirst," Funk said. He said no company would enter into such an agreement without a breakup fee to protect it from a last-minute offer topping its bid after it had gone through a long regulatory process.

"That wouldn't be a big disappointment to me," said Del. Shane Pendergrass, a Howard County Democrat who sponsored a bill that would have prohibited the sale but which has since been amended to where it no longer does so.

Del. Michael E. Busch, chairman of the Economic Matters Committee, said after the hearing that he expects the panel to approve the bill today. Busch said he didn't think the bill was a deal killer.

Funk said the Neall bill is one of three that could kill the deal. Two have passed the House and will have a hearing today in the Senate Finance Committee.

One of those would require any acquisition of CareFirst to be an all-cash deal. The WellPoint contract calls for $850 million of the $1.3 billion to be paid in its stock.

The other would prevent WellPoint from acquiring the Blue Cross and Blue Shield trademarks.

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