SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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):
May 27, 1998
UNITED HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 1-10864 41-1321939
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 936-1300
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On May 28, 1998, United HealthCare Corporation, a Minnesota
corporation ("United HealthCare") and Humana Inc., a Delaware corporation
("Humana") issued a press release announcing that Humana, United HealthCare
and UH-1 Inc., a Delaware corporation and a wholly-owned subsidiary of
United HealthCare ("Merger Sub"), entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated May 27, 1998, pursuant to which Merger Sub will
be merged with and into Humana (the "Merger") with Humana as the corporation
surviving in the Merger. Pursuant to the terms of the Merger Agreement, each
share of common stock, $0.16 2/3 par value per share, of Humana outstanding at
the effective time of the Merger will be converted into 0.5 shares of common
stock, $0.01 par value per share, of United HealthCare.
The preceding is qualified in its entirety by reference to the press
release, which is attached hereto as an Exhibit and incorporated by reference
herein.
Item 7. Exhibits.
99.1 Text of Joint Press Release, dated May 28, 1998, issued by United
HealthCare and Humana.
-2-
<PAGE>
SIGNATURE
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.
UNITED HEALTHCARE CORPORATION
By: /s/ David J. Lubben
--------------------------------
Name: David J. Lubben
Title: General Counsel and
Secretary
Date: May 29, 1998
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United HealthCare and Humana to Merge Page 1 of 6
[UNITED HEALTHCARE LOGO]
UNITED HEALTHCARE AND HUMANA TO MERGE
Merger Creates a Strategic Business Combination Dedicated to
Improving the Health and Well-Being of People Through all Stages
of Life
MINNEAPOLIS, Minn. and Louisville, Ky. (May 28, 1998)--United HealthCare
Corporation (NYSE:UNH) and Humana Inc. (NYSE:HUM) today announced they have
reached a definitive agreement to merge in a transaction approved by the boards
of directors of both companies. The combination will bring together two
organizations who have long been devoted to serving customers with high quality,
accessible and affordable health care services. The combined enterprise will
operate under the United HealthCare name and will be based in Minneapolis, with
a significant workforce and business presence continuing in Louisville.
The proposed merger will be accounted for as a pooling of interests in which one
United HealthCare share will be exchanged for every two Humana shares in a
tax-free transaction. The total consideration of the proposed transaction is
approximately $ 5.5 billion. The transaction will require shareholder and
regulatory approvals and is expected to close in the third quarter of 1998.
William W. McGuire, M.D., United HealthCare's chairman, president and chief
executive officer, said, "The most successful health care companies in the next
decade will be those whose products and services align with the needs and
desires of consumers -- in other words, companies that offer people what they
want. United HealthCare has led the industry in meeting consumer demands for
greater access and flexibility. By year-end, our open access plans will enable
nearly 4 million health plan members in 38 markets to see network doctors and
specialists without a referral."
Dr. McGuire continued, "Consumers want flexibility in choice of doctors and
hospitals, broader access to services, a wide spectrum of products and services
tailored to specific consumer market segments and needs, and greater
affordability. To achieve these objectives and create a powerful platform for
growth, it is critical to create an enterprise that, in an increasingly
competitive marketplace, possesses the size, scale and operating efficiencies
needed to accelerate investments in high quality health and well-being services.
The combination of United HealthCare and Humana is driven by this vision."
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United HealthCare and Humana to Merge Page 2 of 6
Greg Wolf, Humana's chief executive officer, said, " The merged company will be
able to respond, better than any other, to what people want from a health care
company today. With millions of members in 50 states and Puerto Rico, the new
enterprise will realize tremendous economies of scale, unmatched administrative
efficiency and an industry-leading service platform. The result will be more
affordable products, for more people, delivered more efficiently.
"In addition, the merged company will offer greater choice of doctors and
hospitals, consumer-focused, high quality products and the ability to measurably
improve our members' health. A proprietary information system with the capacity
to collect and analyze enormous reservoirs of the most current data will be of
tremendous value to patients and physicians as they seek the best clinical
pathways.
"Finally, the merged entity offers consumers and investors a company with
financial strength, earning power and favorable prospects for substantial
growth," Mr. Wolf added.
David A. Jones, Humana's chairman and co-founder, said, "As the health care
industry grapples with issues of access, affordability, quality and choice, the
size, scope and proven operational competence of the new company will enable us
to address these concerns. We are creating a company whose leadership and
innovation can help people of all ages realize the best of our health care
assets. And through these efforts, this merger holds great promise for
outstanding shareholder returns."
The companies expect the merger to be neutral to earnings in 1998 and accretive
to earnings in 1999 (exclusive of transaction costs) and have identified
significant annual operating synergies that will be realized following the
completion of the transaction. These synergies come from consolidation of
corporate overhead and administration, merging overlapping operations,
integrating and improving medical care programs and cross-selling products and
services.
"We are targeting improvements in operating costs of 3 percent to 5 percent, and
medical costs of 0.75 percent to 1 percent while maintaining our commitment to
providing our customers with the highest quality health and well-being services
they need, when they need them," said Dr. McGuire. "We will move quickly to
eliminate basic functional redundancies and, as a result, improve how we work
for our customers. The integration of each company's best network and medical
management systems will help us to optimize our medical care effectiveness.
Longer term, we will integrate the underlying systems and service processes of
both companies to evolve into the industry-leading service and support platform
that will provide customers and care providers with leading
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United HealthCare and Humana to Merge Page 3 of 6
edge service. We also expect to achieve a sustainable unit cost advantage in the
key operational areas."
Mr. Wolf added, "Most importantly, we believe the merger increases our ability
to introduce new product and service offerings in our local markets, giving
consumers more value and greater choice while enhancing their health and
well-being. As consumers embrace these new offerings, we expect the already
remarkable growth rate of these companies to continue."
Dr. McGuire stated that the merger with Humana fits exceptionally well within
the framework of United HealthCare's six strategic business segments, which will
facilitate a rapid and efficient integration of the combined operations.
Humana's health plans, small group insurance services, and specialized
businesses that include dental, life, workers compensation and disability, are
strong units that complement or add new services to those currently offered by
United HealthCare.
On a pro forma combined basis, United HealthCare would be among the most
prominent health care concerns, with annual revenues approximating $27 billion.
The company will operate in 48 states, Puerto Rico and internationally,
including businesses in Hong Kong, Singapore and South Africa. United HealthCare
will be supported by a dedicated 50,000- member workforce, as well as an
exceptionally strong financial position with more than $13 billion of total
assets, and more than $6 billion in shareholder equity.
Dr. McGuire said, "I am delighted that David Jones will be joining our board of
directors. He has been a key figure in advancing the quality of health care
services in a career that has spanned a period of unprecedented industry
transformation. He has played a central role not only in the creation and
enduring success of Humana, but also in the direction of the entire industry. We
are extremely pleased that David will continue as a member of our board, and
that Greg Wolf and his outstanding management team will be joining us to help
lead the company in the future."
United HealthCare (www.unitedhealthcare.com) is a diversified health services
company that provides a broad spectrum of resources and services to help people
achieve improved health and well-being through all stages of life. United
HealthCare is organized into six business segments: Health Plans, Retiree and
Senior Services, Strategic Business Services, Insurance Services, Specialized
Care Services, and Knowledge and Information Services.
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United HealthCare and Humana to Merge Page 4 of 6
Humana Inc.(www.humana.com), with headquarters in Louisville, Ky., is one of the
nation's largest publicly traded managed health care companies with
approximately 6.2 million customers in its health care programs located
primarily in 16 states and Puerto Rico. Humana offers coordinated health care
through a variety of health plans -- health maintenance organizations, preferred
provider organizations, point-of-service plans, and administrative services
products -- to employer groups, government-sponsored plans and individuals.
FORWARD-LOOKING STATEMENTS
Statements that United HealthCare or Humana may publish, including those in this
announcement, that are not strictly historical are "forward-looking" statements
under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve known and unknown risks which may
cause actual results and corporate developments to differ materially from those
expected. Factors that could cause results and developments to differ materially
from expectations include, without limitation, the ability of the combined
company to execute the anticipated integration and realize the expected
synergies, the effects of state and federal regulations, including those that
impact the formation of the combined companies, the effects of related or other
acquisitions and divestitures, and other risks described from time to time in
each of United HealthCare's and Humana's SEC reports including quarterly reports
on Form 10-Q, annual reports on Form 10-K, and reports on Form 8-K.
UNITED HEALTHCARE-HUMANA
MERGER OVERVIEW
United HealthCare Humana
----------------- ------
Shares 196 Million Exchange Ratio 172 Million
Market Cap $12.5 billion .5 $4.4 billion
Shares Exchanged
86 Million
Total Outstanding
282 Million
Merger Consideration at $32.1 per share $5.5 billion
Premium to Market 22.1%
P/E Multiple at Exchange Ratio 25.4x
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United HealthCare and Humana to Merge Page 5 of 6
Pro Forma Income Statement
In Millions, Except Per Share Data 1998*
-----
United HealthCare Humana
----------------- ------
Revenue $17,129 $9,814
Medical Care 13,220 8,091
Operating Cost 3,270 1,496
Investment Income & Other 275 115
Pretax Earnings 914 342
Net Income $538 $217
Earnings Per Share $2.75 $1.30
Cash Flow From Operations $660 $340
*Based on IBES estimates
Combined Pro Forma Balance Sheet*
Financial Data - In Millions
UHC Humana Combined
--- ------ --------
Assets $7,623 $5,418 $13,041
Liabilities $3,089 $3,917 $7,006
Equity $4,534 $1,501 $6,035
Cash & Investments $4,069 $2,646 $6,715
Tangible Net Worth $2,253 $277 $2,530
*As of 12/31/97
Combined Membership by Business Segment
Members in Thousands
Product Members % of Total
------- ---------- ----------
Health Plan
o Commercial 6,634 34%
o Self-Funded 1,339 7%
o Medicare 902 5%
o Medicaid 1,161 6%
TRICARE 1,112 6%
Small Group Insurance 2,634 14%
National Multi-Site 5,488 28%
As of 12/31/97
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United HealthCare and Humana to Merge Page 6 of 6
<TABLE>
<CAPTION>
Insured Health Plan
Enrollment by Region
Member
United TotalOverlapping
HealthCare Humana Total States
---------- ------ ----- -----------------
<S> <C> <C> <C> <C>
NE (6 States) 405,800 0 405,800 0
SE (11 States) 1,693,400 828,000 2,521,400 3
Midwest (9 1,765,600 811,500 2,577,100 3
States)
SW (3 States) 289,100 488,600 777,700 3
West (5 352,100 -- 352,100 0
States)
Total 4,506,000 2,128,1001 6,634,100
</TABLE>
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