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Merger Agreement and Health Plan Sale
9 Months Ended
Sep. 30, 2012
Business Combinations [Abstract]  
Merger Agreement and Health Plan Sale
Merger Agreement and Health Plan Sale
On July 9, 2012, the Company announced the execution of an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, WellPoint, Inc. (“WellPoint”) and WellPoint Merger Sub, Inc. (“Merger Sub”), an indirect wholly-owned subsidiary of WellPoint, pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub will be merged with and into the Company, with the Company surviving the merger as an indirect wholly-owned subsidiary of WellPoint (the “Merger”). On October 2, 2012, the Company, WellPoint and Merger Sub entered into an amendment to the Merger Agreement to settle claims, without admitting any liability or wrongdoing, related to a class action lawsuit pertaining to the Merger (see Note 11). If the Merger is completed, the Company's stockholders (other than holders of unvested restricted shares of Company common stock and persons who properly demand statutory appraisal of their shares) will be entitled to receive $92.00 per share in cash (without interest) for each share of the Company's common stock that they hold, for an expected total purchase amount of $4.9 billion (the "Merger Consideration"). Under the Merger Agreement, each option to purchase shares of Company common stock that is outstanding and becomes or is vested by its terms at the time of the Merger will be canceled and converted into the right to receive an amount payable in cash equal to the total number of shares subject to the option multiplied by the excess, if any, of $92.00 over the per share exercise price of such vested option. Options that are outstanding but unvested at the time of the Merger will be converted into options to purchase shares of WellPoint common stock according to a formula defined in the Merger Agreement.
On October 23, 2012, the Company's stockholders approved the adoption of the Merger Agreement at the Company's Special Meeting of Stockholders. The consummation of the Merger is subject to customary closing conditions, including, among others, the absence of certain legal impediments to the consummation of the Merger, the receipt of specified governmental consents and approvals, including approval under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, and, subject to materiality exceptions, the accuracy of representations and warranties made by the Company and WellPoint, respectively, and compliance by the Company and WellPoint with their respective obligations under the Merger Agreement. On October 2, 2012 and October 29, 2012, respectively, the state of Tennessee Department of Commerce and Insurance and the state of Texas Commissioner of Insurance each approved the plan of acquisition filed by WellPoint in connection with WellPoint’s acquisition of the Company. The Company continues to pursue regulatory approvals from the remaining states in which it conducts business. The Merger is expected to close in the fourth quarter of 2012.
On September 27, 2012, the Company entered into a definitive agreement to sell its Virginia health plan, AMERIGROUP Virginia, Inc., to Inova Health System. The Company and WellPoint each received a request for additional information ("second request") from the United States Department of Justice ("DOJ") in connection with the DOJ's review of WellPoint's pending acquisition of the Company. The second request focuses on the Company's operations in the Commonwealth of Virginia, and both the Company and WellPoint have worked and continue to work cooperatively with the DOJ staff and representatives of the Commonwealth of Virginia. The sale is conditioned on the closing of the Merger. The sale will divest all of the Company's managed care operations in the Commonwealth of Virginia; is expected to close concurrently with the Merger, currently expected to occur in the fourth quarter of 2012; and is subject to the receipt of customary regulatory approvals and standard closing conditions. In accordance with U.S. generally accepted accounting principles, the anticipated gain on the sale of AMERIGROUP Virginia, Inc. will be recognized upon completion of the sale.