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Amerigroup (AGP) Subsidiary Sale Addresses DOJ Concerns Over Wellpoint (WLP) Acquisition

 November 28, 2012 02:33 PM

(By Balachander) AMERIGROUP Corp.'s (NYSE: AGP) sale of its Virginia operations addresses Department of Justice's (DOJ) concerns with Wellpoint Inc.'s (NYSE: WLP) proposed acquisition of the managed healthcare company.

The DOJ said that the merger would have substantially lessened competition in the provision of Medicaid managed care plans in Northern Virginia.  WellPoint and Amerigroup are the only two providers of Medicaid managed care plans in Northern Virginia. 

Under the terms of the agreement entered in July 2012, WellPoint will pay $92.00 per share in cash or roughly $4.9 billion to acquire Amerigroup.

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Upon closing of the deal, WellPoint said it will serve more than four-and-a-half million beneficiaries of state sponsored health care programs. The combined company's Medicaid footprint will include 19 states.

In September, Amerigroup agreed to sell its Virginia business, Amerigroup Virginia Inc., to a not-for-profit healthcare organization Inova Health System Foundation.

"The divestiture of Amerigroup Virginia will ensure continued competition in the markets for Medicaid managed care plans in Northern Virginia," said Acting Assistant Attorney General Renata Hesse in charge of the Department of Justice's Antitrust Division. 

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The sale ensures that Medicaid beneficiaries in Northern Virginia will continue to have a choice of at least two Medicaid managed care entities, the DOJ said.

AGP shares inched up 0.08 percent to trade at $91.75, while WLP shares shed 0.33 percent to trade at $54.79 on Wednesday.

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