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The $4.9 billion deal would make the Indianapolis-based company the top private manager of Medicaid benefits.
The strategic move underscores WellPoint's bid to shore up its Medicaid business following the recent Supreme Court decision upholding Obamacare. The combined company will have a Medicaid business presence in 19 states, the largest in the nation.
The transaction is expected to close in early 2013. Under the terms of the all-cash deal, WellPoint will pay a lofty $92 a share for all outstanding shares of Amerigroup, a nearly 43% premium to the company's closing price prior to announcement.
WellPoint CEO Angela F. Braly said in a statement, "We believe that this combination will create an industry in the government sector serving Medicaid and Medicare enrollees. This is an opportunity to capitalize on the strengths of both companies to better serve our members and position our companies for future growth as the health insurance industry changes."
WellPoint has been on a buying spree of late. In May, the company purchased contact lens retailer 1-800-Contacts, and last year it picked up CareMore, a provider of managed care for the elderly.