Aetna and U.S. Healthcare agree to merge; $8.9 billion transaction will create nation's leading health care benefits company.HARTFORD, Conn. and BLUE BELL, PA--(BUSINESS WIRE)--April 1, 1996 -- Aetna (NYSE NYSE See: New York Stock Exchange : AET AET Aetna, Inc. AET After Extra Time AET Actual Evapotranspiration AET Alliance for Environmental Technology AET Alpha-Ethyltryptamine AET Applied Extrusion Technologies, Inc. ) and U.S. Healthcare U.S. Healthcare is a now-defunct healthcare company. The logo had an apple. The merger with Aetna In 1996, the company merged with Aetna, calling it Aetna U.S. Healthcare. The U.S. Healthcare apple logo was next to the Aetna name, and U.S. Healthcare under it. U.S. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : USHC USHC United Seniors Health Cooperative USHC US Health Club USHC United States Housing Corporation USHC US Headache Consortium ), two of the nation's leading health care companies, today announced that they have agreed to merge in a transaction valued at $8.9 billion. The combined enterprise will have a unique ability to provide high quality health care services at a reasonable cost on a national scale, meeting the needs of consumers and employers large and small, and generating significant growth opportunities. Together, the two companies provide health care services to 23 million people, or one in every 12 Americans, and will be the leading provider of managed health care services with 10.3 million managed care members. The combined company will offer a full spectrum of products, including behavioral health Behavioral health was first used in the 1980's to name the combination of the fields mental health and substance abuse. As an example, an organization serving both mental health and substance abuse clients might refer to its practice as behavioral health or , vision care, dental, APM (Advanced Power Management) A programming interface (API) from Intel and Microsoft for battery-powered computers that lets programs communicate power requirements to slow down and speed up components. See ACPI. APM - Advanced Power Management (pharmacy), and group life and disability insurance. The merger agreement, which has been approved by the board of directors of each company, calls for the formation of a new holding company, Aetna Inc., domiciled in Connecticut. U.S. Healthcare shareholders will receive $34.20 in cash, 0.2246 shares of Aetna Inc. common stock, and 0.0749 shares of Aetna Inc. mandatorily convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". for each share of U.S. Healthcare. At the March 29 closing price of $75.50 for Aetna, that represents a value of approximately $57 for each U.S. Healthcare share, a 24 percent premium over Friday's U.S. Healthcare closing price of $45.88. Each share of Aetna stock will become a share of Aetna Inc. stock. The combined company will be 78 percent owned by Aetna shareholders and 22 percent owned by U.S. Healthcare shareholders. The merger will be financed with a combination of $5.3 billion in cash, the issuance of $2.7 billion of new Aetna Inc. common stock, and $0.9 billion in preferred securities. The Aetna and U.S. Healthcare health businesses will be in wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Aetna Inc., with each subsidiary maintaining its current name. Aetna Chairman Ronald E. Compton will be chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the new company. U.S. Healthcare Chairman Leonard Abramson Leonard Abramson (born 1932, Pennsylvania) was the founder and CEO of U.S. Healthcare, and has become a major philanthropist in the Philadelphia area. Abramson attended the Philadelphia College of Pharmacy and Science, driving a taxi for cash to cover his expenses. will join Aetna's board of directors and will serve as a strategic consultant to Compton. Two additional directors nominated by Abramson also will be named to the Aetna Inc. board. The agreement is subject to approval by the shareholders of both companies and federal and state regulators, the close of the previously announced sale of Aetna's property/casualty unit to Travelers Group, and other customary conditions. It is expected to close in the third quarter of 1996. Abramson, who is the controlling shareholder of U.S. Healthcare, has agreed to vote in favor of the merger. Compton said, "This merger is a major step in our strategic plan to create an outstanding national health care company which meets customers' needs for high quality health care services at a reasonable cost. It is an excellent strategic fit, and establishes a strong platform for growth, product innovation, superior financial performance and excellent long-term value for shareholders. "Aetna is already one of the leading national health care companies, with a strong national brand name and a wide variety of health care products, serving a large number of Fortune 1000 companies. U.S. Healthcare is widely recognized as the best-managed HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, company, with high customer satisfaction and acknowledged strengths in medical quality and cost management, retail marketing and information systems. Combining these strengths, the new enterprise will be positioned to grow rapidly by offering customers a wide variety of products and services on a national scale," Compton said. Abramson said, "As a leading provider of premier quality health care services, U.S. Healthcare has achieved an enviable level of customer satisfaction. We are successfully expanding our membership in key geographic markets. By merging our premier managed care capabilities with Aetna's ability to manage large, multi-site plan sponsors with complex servicing needs, we can create this country's leading national health care company. "Our focus will continue to be on the health of our members. We intend to set the standard against which all health care companies will be measured in terms of quality of health care delivered, the choice of health care plans and providers, and service to members. We will maintain our leadership position in providing customers with the health information and health care services they need to live healthier and more fulfilling lives," Abramson said. The new company expects to realize from synergies an additional $300 million after taxes from the combined health businesses within 18 months, including enhanced revenues through additional HMO membership and cross-selling opportunities with specialty health and group life, plus reductions in medical and operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . "We expect to be able to deliver substantial growth in earnings beyond 1997 when the effects of the synergies kick in," Compton said. Consistent with its enhanced focus on growth, Aetna's board of directors intends to change the dividend policy to maintain a payout of 10 to 20 percent of operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before before goodwill amortization, upon completion of the transaction. When the merger is complete, the combined health operations will be managed as one organization, with a management team drawn from both companies. Michael J. Cardillo and Joseph T. Sebastianelli, currently co- presidents of U.S. Healthcare, will be co-presidents of the combined health business, reporting to Compton. They will maintain offices in both Blue Bell, PA and Middletown, CT. James Dickerson, currently chief financial officer of U.S. Healthcare, will become chief financial officer of the combined health business, reporting to the co-presidents. Other key management appointments for the combined health care business include: From Aetna: Frolly M. Boyd, group life; A. Bruce Campbell
Bruce Lorne Campbell , Healthways; Allen P. Maltz, chief actuary; Thomas J. McInerney, national accounts; Daniel S. Messina, deputy CFO See Chief Financial Officer. ; Scott A. Striegel, operations; John W. Trustman, information technology, and Thomas R. Williams, specialty health. From U.S. Healthcare: Arthur N. Leibowitz, M.D., chief medical officer; Timothy E. Nolan, sales; David F. Simon, general counsel, and Richard A. Wolfson, pharmacy. "The combined health business will be led by the strongest management team in the industry today, representing the best of both organizations and possessing the skills and experience to successfully drive our business into the future," Compton said. James W. McLane, CEO of Aetna Health Plans, announced that he plans to leave the Company soon, but will work with the integration team to help ensure a smooth transition, reporting to Compton. Compton said, "I'm grateful to Jamie McLane for his efforts over the last five years in building AHP AHP Assistant House Physician. into one of the country's leading health care companies, with the significant position it enjoys today. He is a strong proponent of the decision to merge our health business with U.S. Healthcare, and he will be instrumental in helping to achieve a rapid and effective integration process." A team consisting of Cardillo, Aetna Vice Chairman Richard L. Huber, McInerney and Sebastianelli will plan for integration of the two companies' systems and workforces upon close of the transaction. The combined company will remain committed to its two home regions, Connecticut and Pennsylvania. Both regions will play an important role in the company's future. "As we merge these two businesses, the integration team will work to streamline operations," Compton said. "We will be sensitive to the interests of our employees and the communities where we live and work. We will rely as much as possible on attrition, but some positions may be eliminated. We will give qualified employees preference for new jobs that are created as our business grows." Combined Aetna/U.S. Healthcare health membership is 14.1 million members comprised of 10.3 million managed care members and 3.8 million indemnity members. Aetna is one of the country's largest insurance and financial services organizations, centered around three core businesses: Aetna Health Plans, Aetna Retirement Services and Aetna International. Aetna Health Plans is the country's third-largest health care company, reaching more than 20 million Americans. Aetna Retirement Services markets a variety of retirement, investment and life insurance products to individuals, businesses and not-for- profit institutions, serving 1.5 million customers directly and through nearly 20,000 plan sponsors. Aetna International offers a variety of life insurance and financial services products and has more than 8.5 million customers in 10 countries. U.S. Healthcare provides managed health care services through its HMOs in Pennsylvania, New Jersey, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Delaware, Connecticut, Massachusetts, New Hampshire New Hampshire, one of the New England states of the NE United States. It is bordered by Massachusetts (S), Vermont, with the Connecticut R. forming the boundary (W), the Canadian province of Quebec (NW), and Maine and a short strip of the Atlantic Ocean (E). , Maryland, Georgia, Virginia, Rhode Island Rhode Island, island, United States Rhode Island, island, 15 mi (24 km) long and 5 mi (8 km) wide, S R.I., at the entrance to Narragansett Bay. It is the largest island in the state, with steep cliffs and excellent beaches. , the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). , North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. and South Carolina South Carolina, state of the SE United States. It is bordered by North Carolina (N), the Atlantic Ocean (SE), and Georgia (SW). Facts and Figures Area, 31,055 sq mi (80,432 sq km). Pop. (2000) 4,012,012, a 15. . The Company also provides a variety of other managed health care services to self-insured and other employers, including workers compensation managed care, coordination and administration of multiple health plans for multi-state employers and quality measurement and improvement programs and data analysis systems for providers and purchasers of health care. -0- Shareholders of Aetna and U.S. Healthcare will be asked to approve the merger agreement and exchange of shares pursuant to a proxy statement/prospectus forming part of a registration statement to be filed with the Securities and Exchange Commission (the "SEC"). This press release does not constitute an offer or solicitation of an offer for securities or the solicitation of any approval by shareholders of U.S. Healthcare or Aetna. For additional information regarding factors that may materially affect the acquisition, including estimated earnings, cost savings and improvements and revenue enhancements, please see Aetna's Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed with the SEC today. Additional information about the companies is available on the following Internet addresses: www.aetna.com and www.ushc.com CONTACT: Aetna, Media: Joyce Oberdorf, 860/273-7392 or Investors: Daniel Messina, 860/273-6184 U.S. Healthcare, Media: Jill Griffiths, 215/283-6890 or Investors: James Dickerson, Jr., 215/283-3091 |
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