WellPoint withdraws application to acquire Delaware CareFirst

`Procedural' action allows savings in consulting fees

August 16, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

Looking to save or delay several million dollars in consulting fees, WellPoint Health Networks Inc. said it was withdrawing, perhaps temporarily, its application in Delaware to acquire CareFirst BlueCross BlueShield.

However, California-based WellPoint said it is moving ahead with seeking approval in Maryland and the District of Columbia, and expects to refile in Delaware if it is satisfied with a consultants' report in Maryland on the value of CareFirst.

Ken Ferber, a WellPoint spokesman, said the action was "purely procedural," did not indicate any diminished interest in CareFirst and is unlikely to delay the deal if WellPoint decides to go ahead.

Michael J. Rich, legal counsel to the Delaware Department of Insurance, said, "The withdrawal stops all insurance department activity" in reviewing the WellPoint-CareFirst deal. Whether that would delay a final decision, which had been expected early next year "depends on what they do and when they do it," Rich said.

Debbie Rosen McKerrow, director of communications for the Maryland Insurance Administration, said the Delaware action would have no impact on proceedings here.

WellPoint and CareFirst are seeking approval from regulators in the three jurisdictions for CareFirst to convert to for-profit operation and be sold to WellPoint for $1.3 billion. The proceeds would go to health-related foundations or other public purposes. The officials are hiring outside experts to review the deal. WellPoint has to pay for those consultants.

Blackstone report

Ferber said WellPoint will decide whether to go ahead in Delaware "after we've had a chance to look at the Blackstone report." The Blackstone Group of New York is advising Maryland Insurance Commissioner Steven B. Larsen on whether $1.3 billion is a fair price for CareFirst. WellPoint is paying $1.85 million for Blackstone's report to Larsen.

It's possible the Blackstone report will convince WellPoint that it doesn't want to go ahead with the deal in Maryland, Ferber said.

That would make the Delaware consultants' work moot, and WellPoint would save some of the Delaware costs.

Ferber said the Delaware costs could be "several million dollars" and the District of Columbia costs "more than a million." The Maryland consultants - three others in addition to Blackstone - could be paid much as $5 million.

Draft likely this month

McKerrow said Blackstone is expected to present a draft to Larsen this month. After review and possible revisions, Larsen will make the report public, "but when and how has not been decided," she said.

The other Maryland consultants are due to report by the end of October. They are studying the potential impact of the deal on consumers, the process followed by CareFirst's board and the operation of other health-related foundations.

Rich said he was not sure of the cost of the work done by Delaware consultants, but that WellPoint was obligated to pay for work that has been done. He also said he did not have a figure on the expected total costs of the Delaware consultants.

CareFirst had no immediate comment on WellPoint's action, which was announced yesterday afternoon.

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