Health insurer UnitedHealth Group agreed on Monday to acquire Oxford Health Plans for $4.9 billion in cash and stock in a bid to add more members in the northeastern United States, the companies said Monday.
The deal was announced just days after talks broke down between Oxford and WellChoice Inc.
The acquisition will not be enough to let UnitedHealth keep its position as the nation’s biggest HMO. Rival Anthem Inc. will claim that title, as counted by medical membership, after it closes its purchase of WellPoint Health Networks.
Under the deal announced Monday, UnitedHealth will pay $16.17 a share, or $1.4 billion, plus 0.6357 share of stock for each Oxford share.
Oxford, with key market share in the lucrative Northeast region but stagnant membership growth, had been seen a prime target for takeover by a bigger HMO.
The managed health care industry is consolidating, as HMOs seek new members amid tepid job growth in the United States. Analysts said UnitedHealth, which recently swallowed another regional health plan, Mid Atlantic Medical, has an impressive record of integrating regional companies.
Competition for new members is fierce in the Northeast, with market share held by several sizable players, including UnitedHealth, Oxford, WellChoice and Aetna Inc., analysts said.
“It makes sense they’d want to increase their market share in that area,” said Jeff Bianchi of ING Investment Management. “It had long been rumored as a possibility,” he added.
The deal would be worth $4.9 billion in cash and stock based on UnitedHealth’s closing stock price Monday.
Shares of UnitedHealth fell 0.9 percent to $63.35 on the INET electronic trading system. Oxford share rose 0.7 percent to $55.30.