Although Aetna's (AET)
A lawsuit filed by the Louisiana Municipal Police Employees Retirement System (LMPERS) alleges that Goldman Sachs was financially motivated to sell Amerigroup quickly, favoring an expedient deal with WellPoint on July 13 over more lucrative bids that could have fetched shareholders a greater price than the final $92 a share deal, which came at a 43% premium to the trading price.
LMPERS is asking that Delaware court to block the deal and re-open Amerigroup's sale process because it alleges Goldman Sachs made it hard for competing bidders to WellPoint to enter deal negotiations. The suit highlights that Goldman Sachs stood to gain up to $233 million from a warrant contract it bought if Amerigroup were sold prior to August 13.
While it is unclear how the shareholder lawsuit will unfold - LMPERS previously won a contest against Goldman in its advisory role on El Paso's (EP)
In the suit, LMPERS notes that an unnamed 'Company D' was willing to pay more to Amerigroup shareholders than WellPoint's $4.9 billion takeover offer, and that other suitors "E", "F" and "G" also held deal talks, signaling widespread interest. The lawsuit also shows that M&A efforts were underway in 2011, well before there was any certainty over whether the Supreme Court would let the Act stand.
"Beginning in December 2011, several suitors expressed unsolicited interest in entering a potential strategic transaction with Amerigroup," alleges LMPERS in its suit. In February, "Company D" met with Amerigroup's chairman and chief executive James Carlson about a deal and in March, companies E, F and G also held discussions with Carlson to "the foundation for future strategic transactions," the suit notes.
LMPERS' suit against Goldman alleges that despite seemingly widespread acquisition interest in Amerigroup, the company's board, at the advice of Goldman and co-financial advisor Barclays
Those allegations signal that although Aetna and WellPoint may are among the largest healthcare providers in the nation, larger suitors may yet be in the cards. Currently, UnitedHealth Group (UNH)
Bank of America Merrill Lynch analyst Kevin Fischbeck highlights that consolidation may be challenged in the healthcare space after Monday's deal because both companies were the most likely consolidators and larger players like UnitedHealth Group could have faces antitrust scrutiny. "
Although Aetna's Monday's acquisition of Coventry Health Care and WellPoint's deal for Amerigroup are large consolidation efforts that quickly were unveiled after the Supreme Court's decision, the story illuminated in LMPERS' lawsuit signals a wider M&A appetite.
In reaction to WellPoint's acquisition of Amerigroupm, analysts highlighted Centene (CTN)
In June the Court confirmed the Act's ability to force Americans to carry health insurance and compel insurers to cover people with pre-existing health conditions. The Supreme Court, however, limited the extension of Medicaid, deeming it unconstitutional for the federal government to withhold money from states that don't comply with the Act.
Some estimate that between 16 million to 20 million new Americans would be eligible to enroll in Medicaid through the Affordable Care Act.
"There is a very basic level of consolidation that is taking place," said Marc Cabrera, head of the health care investment banking practice at Morgan Joseph TriArtisan, of widespread health care sector M&A efforts, in a late June interview that came before the court's ruling.
Regardless of the Supreme Court's ruling, companies will be pressured to figure out a way to grow the bottom-line in a health care market that's likely to become far more cost-competitive. "We do not see that the cost trend today is sustainable, therefore to be a winner in the future you need to be bigger and have economies of scale," added Cabrera in June.