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): June 25, 1995
UNITED HEALTHCARE CORPORATION
(Exact name of registrant as specified in charter)
MINNESOTA
(State or other jurisdiction of incorporation)
0-13253 41-1321939
(Commission File Number) (IRS Employer Identification No.)
300 Opus Center, 9900 Bren Road East, Minnetonka, MN 55343
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 936-1300
<PAGE>
Item 5. Other Events
On June 26, 1995 United HealthCare Corporation ("Registrant"),
announced that it and a wholly owned subsidiary of Registrant
("Acquiror Sub"), executed and delivered an Agreement and Plan of
Merger on June 25, 1995, with The MetraHealth Companies, Inc., a
Delaware corporation ("MetraHealth"), and certain of its
shareholders and their affiliates, The Travelers Insurance Company
("Travelers"), The Travelers Insurance Group, Inc., MetLife
HealthCare Holdings, Inc. and Metropolitan Life Insurance Company,
a New York mutual life insurance company ("MetLife"), to acquire
MetraHealth. Upon the terms and subject to the conditions set forth
in the Agreement, Acquiror Sub shall be merged with and into
MetraHealth. As a result of the Merger, the separate corporate
existence of Acquiror Sub shall cease and MetraHealth shall
continue as the surviving corporation of the Merger.
MetraHealth, which is privately held, was formed in January 1995 by
combining the group health care operations of MetLife and
Travelers. MetraHealth covers more than 10 million individuals,
including 4.6 million in network-based care programs, approximately
450,000 of whom are health maintenance organization (HMO) members.
It provides health-related services to 58,000 companies, including
more than 40 of the Fortune 100. In addition, MetraHealth covers
approximately 18 million individuals through its specialty care
programs.
Under the terms of the Agreement, Registrant will pay $1.15 billion
in cash and $0.5 billion of 5.75% convertible preferred stock, for
a total consideration at closing of $1.65 billion. The convertible
preferred stock will be convertible into Registrant's common stock
at $49.48, will have a three-year no-call provision, and will have
a ten-year mandatory redemption. In addition, the current owners
of MetraHealth will be eligible to receive up to an additional $350
million if, based on MetraHealth's 1995 results, as defined,
MetraHealth achieves certain operating results. Any consideration
payable for this 1995 earnout over and above the initial $1.65
billion may, at Registrant's sole discretion at that time, be in
the form of cash, covertible debt, convertible preferred stock, or
straight debt. Moreover, if Registrant's post-acquisition combined
net income for 1996 and 1997 reaches certain specified levels,
MetraHealth's current owners will be eligible to receive up to an
additional $175 million in cash for each of those years. The
agreement was negotiated at arms-length and the cash portion of the
consideration will be paid from Registrant's available cash
resources.
The anticipated closing date of the acquisition is during
Registrant's 1995 fourth quarter.
Registrant and MetraHealth issued a joint press release on June 26,
1995, a copy of which is attached hereto as Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
Exhibit 99--United HealthCare Corporation and MetraHealth
Companies, Inc. press release, dated June 26, 1995.<PAGE>
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 thereunto duly authorized.
UNITED HEALTHCARE CORPORATION
(Registrant)
By /s/David P. Koppe
David P. Koppe
Chief Financial Officer
Date: July 5, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page No.
99 United HealthCare Corporation and MetraHealth
Companies,Inc.press release dated
June 26, 1995. 5
(For Immediate Release)
UNITED HEALTHCARE TO ACQUIRE METRAHEALTH FOR $1.65 BILLION
Nation's Largest Health Care Management Services Company
Will Have Strong Local Focus
MINNEAPOLIS, Minn., and McLEAN, Va. (June 26, 1995) --United HealthCare
Corporation (NYSE: UNH), of Minneapolis, and The MetraHealth Companies Inc.
("MetraHealth"), of McLean, Virginia, today announced that they have signed
a definitive agreement under which United HealthCare will acquire
MetraHealth. The transaction will create the nation's largest health care
management services company, with annual revenues of more than $8 billion
and more than 40 million enrollees in a variety of programs providing
health care management products and services.
United HealthCare, founded in 1974, is one of the nation's largest, most
experienced health care management services companies and a leader in data-
driven quality-of-care and accountability initiatives. It has more than
3.7 million owned and managed health plan members and more than 27 million
persons covered by various specialty services. MetraHealth, which is
privately held, was formed in January 1995 by combining the group health
care operations of Metropolitan Life Insurance Company ("MetLife") and The
Travelers Insurance Company ("Travelers"). MetraHealth covers more than
10 million individuals, including 4.6 million in network-based care
programs --approximately 450,000 of whom are health maintenance
organization (HMO) members. It provides health-related services to 58,000
companies, including more than 40 of the Fortune 100. In addition,
MetraHealth covers approximately 18 million individuals through its
specialty care programs.
William W. McGuire, M.D., president, chairman and chief executive officer
of United HealthCare Corporation, said: "The most successful health care
management companies in the next decade will be those that best address the
need for lower costs and better quality of care, flexibility in choice of
providers, and greater access to services for a broader spectrum of the
American population. Recognizing this, we are creating a unique health
care management company, one that will be truly consumer-driven: national
in scope and local in focus. The strengths of our existing businesses and
platforms for growth, along with our respective assets and capabilities in
serving complementary markets, will enhance customer value by providing
affordable coverage while offering more choice and greater access across
a diverse group of products and markets, including government, Fortune 500
companies and other large employers, mid-size to small businesses,
individuals and rural America."
Dr. McGuire added that United HealthCare approached MetraHealth this spring
as MetraHealth's increasingly strong position -- evidenced by client
service and retention, national account revenue, network integration and
resultant enhanced value to customers, as well as financial results --
became apparent. "Our two companies complement and strengthen each other
in terms of geographic presence, product strengths, distribution channels
and core competencies, and both have built outstanding management teams.
It was clear early on that MetraHealth could be an outstanding asset to our
company."
The combined enterprise will provide its existing and new customers with
access to a broad range of high-quality, affordable health care products,
from integrated network based care--including HMOs, point-of-service (POS),
preferred provider organization (PPO) products and others--to diverse
indemnity insurance offerings and a broad range of specialty care programs.
Under the terms of the proposed acquisition, which will be accounted for as
a purchase transaction, United HealthCare will pay $1.15 billion in cash
and $0.5 billion of 5.75 percent convertible preferred stock, for a total
consideration at closing of $1.65 billion. The convertible preferred stock
will be convertible into United HealthCare common stock at $49.48, will
have a three-year no-call provision, and will have a ten-year mandatory
redemption. In addition, MetraHealth's current owners will be eligible to
receive up to an additional $350 million if, based on MetraHealth's 1995
results, as defined, MetraHealth achieves certain operating results. Any
consideration payable for this 1995 earnout over and above the initial
$1.65 billion may, at United HealthCare's sole discretion at that time, be
in the form of cash, convertible debt, convertible preferred stock, or
straight debt. Moreover, if United HealthCare's post-acquisition combined
net income for 1996 and 1997 reaches certain specified levels,
MetraHealth's current owners will be eligible to receive up to an
additional $175 million in cash for each of those years.
The transaction is expected to be additive to United HealthCare's earnings
immediately upon closing. The company also expects to benefit from
marketing, operating, medical cost management and administrative synergies.
The additive nature of the transaction and the potential for even greater
EPS growth are expected to be sustained over the long term as a result of
efficiencies to be achieved by combining operations, by leveraging the
strengths of the companies' respective capabilities and product lines, and
by building in new markets on an existing client base.
Dr. McGuire said: "While an increasing number of MetraHealth's non-HMO
customers are expected to take advantage of United HealthCare's HMO
products, the success of the merger is not dependent on this. The company
will provide its expanded customer base with a broad continuum of managed
health care products and services, and insurance options that can incorporate
managed health care principles and tools. Additionally, the company will
focus resources on markets served by MetraHealth where significant growth
opportunities exist. We will be careful to focus our efforts on those markets
and product areas that offer the greatest future benefit to the company and
its clients."
Kennett L. Simmons, chairman and chief executive officer of The MetraHealth
Companies, said: "MetraHealth brings to the new company many important
strengths. We have a nationwide presence, with owned provider networks --
which we have restructured over the past six months-- in 90 metropolitan
markets. We also have a major position in serving large corporate
customers, a strong leadership position in the small group business segment
that is particularly focused on rural markets, and 29 HMO licenses. And we
bring a superb management team representing excellent, seasoned talent from
Travelers and MetLife as well as external recruits -- the best of all
worlds.
"By creating this new company, we will be in an even better position to
respond proactively to the changing needs of our multi-site customers
across the country by offering additional and larger, locally-competitive
provider networks and additional managed care products as well as a broad
range of indemnity and other insurance products. At the same time, we will
enhance the local-market focus and results so critical to our mission."
Dr. McGuire said: "We are creating a company with a unique set of products,
skills, people and new marketing opportunities--a company singularly
positioned for growth and long-term success in a rapidly evolving and
competitive business environment. By offering our combined products and
services and leveraging the strengths of both companies, we will better
serve our customers while creating new avenues for revenue and earnings
growth."
Key benefits of the transaction include the potential for new business
opportunities. First, nearly 2.8 million MetraHealth covered lives now in
states where United HealthCare has owned health plans will have access to
these plans and other United HealthCare programs. Second, United
HealthCare will be well-positioned to serve commercial, Medicare and
Medicaid clients in major new markets where it will have a critical mass of
network and non-network lives, including New York, Connecticut's Fairfield
County, Boston, Phoenix, Los Angeles, San Francisco, Houston, Dallas,
Austin, San Antonio, Orlando, Tampa, Cincinnati, Seattle and Denver.
Third, building on MetraHealth's expertise and existing programs, United
HealthCare will provide very strong national account service and offerings.
Fourth, the quality and breadth of the combined specialty programs offered by
the two companies will be unsurpassed in the industry, further facilitating
the reintegration of health care services for clients now served by multiple
"carve-out" suppliers. In short, the new company will greatly increase
its ability to compete at all levels of the local and national markets with
an optimal, integrated product line and service capability.
It is expected that at closing MetraHealth will have a book value of
approximately $860 million. United HealthCare plans to amortize the
goodwill generated by the transaction over a thirty-year period. Both
MetraHealth and United HealthCare are well-capitalized companies, and United
HealthCare will remain well-capitalized, with no long-term debt and more than
$2.3 billion in total cash when the transaction is completed. Strong
positive cash flow is expected from future operations.
United HealthCare's current corporate headquarters will remain in
Minneapolis. Key MetraHealth locations in Virginia, Connecticut and New
York will be retained as well as major-market operation sites.
Dr. McGuire will serve as chairman and CEO of the company. Mr. Simmons
will, following completion of the transaction, leave management and join
the company's board as a director and will serve as chairman of the
executive committee of the board. The organization's new senior management
team will be formed from existing senior management of both United
HealthCare and MetraHealth.
"As a former chief executive officer of United HealthCare, I know, and have
the highest regard for, both the company and Bill McGuire," Mr. Simmons
said. "The senior management team at MetraHealth has been extraordinarily
excited about MetraHealth, its recent performance, and its potential for
future success. I am even more excited about the competitive potential
created by combining MetraHealth and United HealthCare. Under Bill's
leadership, the combined organization has an exciting future. I will
remain actively involved with the company as a member of United
HealthCare's board of directors."
Dr. McGuire said: "Ken Simmons has done an outstanding job in launching
MetraHealth. He has made great strides in assembling one of the industry's
brightest management teams, in moving to strengthen managed care
applications for the business, and in streamlining the organization to fit
the realities of a competitive health care marketplace. We intend to
continue his efforts and would like to welcome MetraHealth employees to
join United HealthCare employees as partners in a unique health care
enterprise."
The transaction is subject to customary federal and numerous state
regulatory approvals and other customary closing conditions and is expected
to close in the fourth quarter of 1995.
(more)
Following the completion of the transaction, United HealthCare will be able
to offer, under a separate agreement with Metropolitan Life, life and other
insurance policies and products from the nation's largest life insurance
company along with United HealthCare's own health care products. United
HealthCare will also explore opportunities to develop new business by
working with MetLife in the area of disability cost management and long-
term care and with The Travelers in the area of workers' compensation cost
management. "I am particularly excited about these and additional joint
opportunities as we move ahead. MetLife and Travelers are leaders in these
areas, and their participation with us will tremendously enhance our
product offerings," Dr. McGuire said.
United HealthCare is a national leader in health care management, serving
purchasers, users, managers and providers of health care since 1974. The
company's broad range of products is offered through 21 locally-based,
owned and managed health plans, whose membership exceeds 3.8 million, and
its non-geographically-bounded specialty care management companies, which
serve the needs of 27 million-plus lives. The company's offerings include
HMOs; PPOs; health plan management; managed mental health and substance
abuse services; utilization management; workers' compensation and
disability management services; specialized provider networks; employee
assistance services; Medicare and managed care programs for the aged;
managed Medicaid services; health care evaluation services; information
systems; and administrative services.
MetraHealth--formed in January 1995 through the combination of the group
health care businesses of Metropolitan Life Insurance Co. and The Travelers
Insurance Co.--finances, manages and administers health insurance plans and
delivers managed health care services for its customers. The company
serves millions of Americans with its health care plans and operates in all
50 states. Its managed care networks include 29 HMO licenses, 72 point-of-
service networks, and MetraHealth managed PPOs in more than 90 markets
nationwide. In addition to its full range of both managed care and
indemnity plans, the company offers managed behavioral health, managed
pharmacy, data analysis, demand management, managed workers' compensation
and third-party administrator (TPA) services.
# # #
CONTACTS
United HealthCare Corporation The MetraHealth Companies
Noreen Conway, Vice President Elliot Gerson
Public Relations & Communications Executive Vice President
612-936-1125 703-918-4015
Bernard F. McDonagh Virginia Quarti
Vice President, Investor Relations Senior Vice President
612-936-7214 203-277-4930
Summary Data
MetraHealth Companies Inc.
For the three
Unaudited Pro Forma months ended
Income Statement March 31, 1995
(In millions)
Revenues
Premiums $ 696
Fees/other income 287
Net investment income 27
--------------
Total Revenues 1,010
Expenses
Medical costs 563
Selling, general and administrative 385
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Total Expenses 948
Income before income taxes 62
Income taxes 22
--------------
Net income $ 40
--------------
--------------
Unaudited Pro Forma Summary
Balance Sheet Data March 31, 1995
(In millions)
Total investments $1,981
--------------
--------------
Total assets $2,579
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--------------
Total liabilities $1,797
--------------
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Total shareholders'equity $ 782
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Membership Data by Product March 31, 1995
HMO
Commercial 447,000
Medicaid 2,000
--------------
Total HMO 449,000
POS 1,894,000
PPO 2,548,000
--------------
Total network based products 4,891,000
Indemnity 5,250,000
TPA 533,000
--------------
Total 10,674,000
--------------
--------------
Membership Data by Funding
Arrangement/Segment March 31, 1995
Insured:
HMO 413,000
POS 243,000
PPO 865,000
Indemnity 783,000
--------------
Total insured 2,304,000
Self-funded-ASO:
HMO 36,000
POS 1,651,000
PPO 1,563,000
Indemnity 4,467,000
TPA 653,000
--------------
Total Self-funded-ASO 8,370,000
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Total 10,674,000
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