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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to
Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 9, 1998
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AETNA INC.
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(Exact Name of Registrant as Specified in its Charter)
Connecticut
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(State or Other Jurisdiction of Incorporation)
1-11913 02-0488491
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(Commission File Number) (I.R.S. Employer
Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
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(Address of Principal Executive Offices) (ZIP Code)
(860) 273-0123
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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TABLE OF CONTENTS
Page
Item 5. Other Events. 3
Item 7(c). Exhibits. 3
Signatures 4
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Item 5. Other Events.
On December 9, 1998, Aetna Inc. and a subsidiary entered into
definitive agreements with The Prudential Insurance Company of
America and a subsidiary to acquire the Prudential HealthCare
business for $1 billion.
A copy of Aetna's and Prudential's joint press release announcing this
transaction is attached hereto as Exhibit 99, which exhibit is
incorporated herein by reference.
Item 7(c). Exhibits.
Exhibit 99 Press Release of Aetna Inc. dated December 10, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AETNA INC.
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(Registrant)
Date: December 10, 1998 By /s/ Alan M. Bennett
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Alan M. Bennett
Vice President
and Corporate Controller
(Chief Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Description
99 Press Release of Aetna Inc. dated December 10, 1998
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Exhibit 99
Aetna Media Contact: Prudential Contact:
Joyce A. Oberdorf Bob DeFillippo
(860) 273-7392 (973) 802-4149
Aetna Investor Contact: or:
Robyn S. Walsh Kevin Heine
(860) 273-6184 (973) 802-7455
AETNA TO ACQUIRE PRUDENTIAL HEALTHCARE FOR $1 BILLION
HARTFORD, CT, and Newark, NJ, December 10, 1998 - Aetna (NYSE:
AET) and The Prudential Insurance Company of America announced
today that they have entered into definitive agreements for Aetna
to acquire the Prudential HealthCare business for
$1 billion.
The acquisition would add approximately 6.6 million health
members to Aetna U.S. Healthcare's membership base, making Aetna
the country's largest provider of health benefits with
approximately 22.4 million members, and the nation's number one
managed care company with 18.4 million managed care members. The
transaction also would more than double Aetna's dental membership
from approximately 7 million members to over 15 million, making
Aetna U.S. Healthcare the country's largest provider of dental
benefits.
"This is a compelling opportunity that should immediately add
value for our shareholders and clearly establishes Aetna as a
leader in health care, serving one in 10 Americans," said
Richard L. Huber, Aetna Chairman and Chief Executive Officer.
"Both Aetna U.S. Healthcare and Prudential HealthCare members
will benefit from a choice of even more physicians," Huber said.
"In addition, Prudential HealthCare's commitment to quality, as
well as the additional scale, will improve our ability to provide
physicians information that helps them get our members the care
they need."
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Aetna expects the transaction to be accretive to operating
earnings for 1999. The company anticipates achieving annual cost
savings and synergies of approximately $130 million to $150
million after tax within two-plus years after closing.
"The sale of our health care business is part of a continuing
process to make Prudential more valuable to its policyholders and
a world-class competitor," said Arthur F. Ryan, Prudential
Chairman and CEO. "We are taking advantage of the consolidation
trend in the health care industry to divest Prudential of a
valuable but noncore asset. Exiting the health care market will
allow us to concentrate additional capital and resources on
insurance and financial services - areas in which Prudential is
accelerating its growth both in the U.S. and internationally.
"We actively sought a buyer for our health care division that
shared our commitment to quality and the well-being of our
members," Ryan added. "We are very pleased to be entrusting this
business to a health care leader focused on service and quality."
Included in this transaction are the Prudential HealthCare HMO,
POS, PPO, and indemnity health lines, as well as its dental
business. The transaction does not include Prudential's Group
Life & Disability Insurance operation, which is now part of its
Institutional division. With the Prudential HealthCare
acquisition, Aetna U.S. Healthcare would be in the top three
managed care companies in nine key states: New York,
New Jersey, Pennsylvania, Texas, Maryland, Florida, Georgia,
Virginia and Ohio. Additional membership will be gained in
California, as well as Missouri, Colorado, Kansas and Tennessee,
among other markets.
"The combination of the Prudential HealthCare business and Aetna
U.S. Healthcare is a terrific strategic fit, which substantially
increases our membership density in key markets," said Huber.
"We will be able to offer our customers flexibility in product
offerings, as well as access to the largest provider network over
a broad service area."
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The transaction is expected to be financed with fixed-income
securities. It has been approved by the boards of both
companies. It is expected to be completed in the second quarter
of 1999, and is subject to approval by federal antitrust and
state regulators, and other customary closing conditions.
"We plan to take the same deliberate approach that we have used
for the integration of NYLCare, focusing on maintaining quality
service throughout the integration period," Huber said. "Since
Prudential HealthCare has already consolidated its service
centers into four major locations, we will focus on the immediate
integration of core functions and productivity improvements.
While jobs will be affected, we plan to rely as much as possible
on attrition and growth in our business as we streamline
operations." He noted that the company plans to retain all four
Prudential HealthCare service centers.
Prudential HealthCare operates managed health care plans in more
than 40 major metropolitan locations serving 5 million health
plan members nationwide. The Prudential Insurance Company of
America is one of the largest financial institutions in the world
and the largest life insurance company in the United States. It
has a major presence in the insurance, securities and money
management, employee benefits and administration, consumer
banking, and real estate brokerage and relocation industries.
Prudential's Web site address is www.prudential.com.
Aetna is a leading provider of health, retirement and financial
services benefits. Through its three core businesses, Aetna U.S.
Healthcare, Aetna Retirement Services and Aetna International,
the company provides 35 million people worldwide with quality
products, services and information to help them manage best what
matters most: their health and financial well-being. Aetna's Web
site address is www.aetna.com.
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CAUTIONARY STATEMENT - Certain information in this press release
is forward looking including, but not limited to, statements
concerning the projected estimated earnings impact of the
proposed acquisition on Aetna, potential synergies and cost
savings that may result from the acquisition and the expected
timing of the closing of the acquisition. That information is
based on management's estimates, assumptions and projections and
is subject to significant uncertainties, many of which are beyond
the control of the company. Important risk factors could cause
Aetna's actual future results to differ materially from those
currently estimated by management. Those risk factors include,
but are not limited to, the ability to successfully close and
integrate the Prudential health transaction on a timely basis and
in a cost-efficient manner (which also is affected by the ability
to eliminate duplicative administrative functions, integrate
management information systems and the timing of numerous
required regulatory approvals), adverse government regulation
(particularly in key markets where Prudential health operates),
unanticipated increases in medical costs resulting from changes
in contracting or recontracting with providers, adverse pricing
actions by government payors, and changes in size and product mix
of membership in key markets following the transaction, Year 2000
issues, the effect of interest rate changes on financing costs,
and litigation. For further discussion of important risk factors
that may materially affect the forward-looking statements herein,
please see the risk factors contained in Aetna's Securities and
Exchange Commission filings, which risk factors are incorporated
herein by reference. This press release does not constitute an
offer or solicitation of an offer to purchase Aetna securities.
