Aetna will purchase leading regional health care network
Acquisition gives Aetna customers access to highly competitive health care networks in Michigan and Colorado
HARTFORD, Conn., June 24, 2005 — Aetna (NYSE: ΑET) today announced that it has entered into an agreement to acquire HMS Healthcare, a leading regional health care network. This acquisition will enable Aetna to strengthen its local market presence — particularly in Michigan and Colorado — by providing access to highly competitive health care networks. In addition, Aetna also enters the market for providing network access to other health plans in those states.
Aetna will acquire HMS Healthcare for approximately $390 million, subject to customary post-closing adjustment, and expects to finance the transaction from available cash. The transaction has been approved by HMS Healthcare’s board of directors and stockholders and is subject to customary closing conditions and federal Hart-Scott-Rodino antitrust regulatory approval. Aetna expects to close the transaction during the third quarter of 2005 and that it will be accretive to earnings during the first year.
"Aetna is committed to giving employers and individuals in Michigan and Colorado access to affordable, high-quality health care," said John W. Rowe, M.D., Aetna chairman and CEO. "The enhanced network strength gained through this acquisition will give Aetna’s existing customers access to a broad and cost-effective network of physicians, hospitals and other health care providers, while offering HMS Healthcare’s customers the stability of Aetna’s 152-year heritage. It also should position Aetna to compete strongly in the markets served by HMS Healthcare.
"Aetna will substantially extend its potential for growth, especially in Michigan, where HMS Healthcare, under the trade name PPOM, has a leading hospital and physician network, significant brand awareness and market breadth. Michigan is a state with a population of 10 million and where PPOM networks currently serve more than 1 million residents, effectively making it the second largest health care system in the state. PPOM has the second-largest subscriber base and the second-highest number of billings with doctors and hospitals in Michigan. In addition, this acquisition positions Aetna to further expand its market share in Colorado."
"HMS Healthcare is one of the best regional PPO networks in the country," said Ronald A. Williams, Aetna president. "It enjoys a competitive advantage based on two major strengths: well-established relationships with physicians, hospitals and other health care providers in the markets it serves; and competitive networks. This acquisition simultaneously meets two of our stated objectives for strategic acquisitions: it enables us to enter an attractive new market segment and improve our local position in important geographic markets."
The privately held firm, which is majority owned by entities affiliated with KRG Capital Partners, operates under four trade names. PPOM, based in Southfield, Michigan, manages and provides access to networks throughout Michigan and parts of Ohio and Indiana. Flora Health Network operates in Ohio, Indiana and Kentucky. Sloans Lake Preferred Health and Mountain Medical Affiliates, based in Denver, manage and provide access to networks in Colorado.
HMS Healthcare has approximately 400 employees, about two-thirds of whom are based in Michigan, and one-third in Colorado. Aetna intends to operate HMS Healthcare as part of its Business Alliances group, which offers products and services to other health plans, associations, workers compensation and auto insurers, colleges and other business partners. Aetna also intends to retain key HMS Healthcare management to continue serving and growing a broad range of customers that includes third-party administrators, local and regional health insurance carriers, self-insured customers and unions.
As one of the nation’s leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits, Aetna puts information and helpful resources to work for its approximately 14.4 million medical members, 12.8 million dental members, 9.0 million pharmacy members and 14.0 million group insurance members to help them make better informed decisions about their health care and protect their finances against health-related risks. Aetna provides easy access to cost-effective health care through a nationwide network of more than 672,000 health care professionals, including approximately 400,000 primary care and specialist doctors and 4,084 hospitals. For more information, please
visit www.aetna.com. (Figures as of March 31, 2005)
ADDITIONAL INFORMATION; CAUTIONARY STATEMENT -- Certain information in this press release is forward looking, including, but not limited to, the projected earnings accretion and other future growth and benefits projected to be realized from this transaction and the expected timing of the closing. Forward-looking information is based on management’s estimates, assumptions and projections, and is subject to significant uncertainties and other factors, many of which are beyond Aetna’s and HMS Healthcare’s control. Important risk factors could cause actual future results and other future events to differ materially from those currently estimated by management. Those risk factors include, but are not limited to: the ability to successfully develop and integrate the business operations described herein in a timely and cost-efficient manner (including obtaining the required regulatory approvals on a timely basis to close the transaction and operate the business); the ability to realize projected revenue and cost and expense synergies; the ability to retain current membership of HMS Healthcare and grow its membership in the future and retention of key personnel of HMS Healthcare.