Report Of WellChoice-Oxford Talks
If it materializes, the acquisition of Oxford Health Plans by WellChoice, Inc. would realize “substantial” synergies and move the industry further along toward oligopoly, according to a leading industry analyst.
On April 5, The Wall Street Journal reported that WellChoice, New York, and Oxford, Trumbull, Conn., are in talks about an acquisition. WellChoice has the exclusive right to use the Blue Cross Blue Shield marks in 10 New York counties.
At press time, spokespeople for both WellChoice and Oxford Health Plans declined comment.
At midday on April 5, both WellChoices and Oxfords stock prices had risen.
Both companies have sizeable market shares in the New York metropolitan area. In New York City, WellChoices market share is 22%, while Oxfords is 8%, according to Smith Barney. In the Northeast, WellChoices share is 12% and Oxfords is 9%.
Analysts generally had a positive response to the Journals article about talks between the 2 companies. In an April 5 analysis, Smith Barney analyst Charles Boorady noted that the move up in both stocks following the report of talks “bodes well for a potential merger to be announced and also for M&A generally in the managed care space.”
Brad Ellis, an analyst in the Chicago office of Fitch Ratings, said that if reports prove true, there would probably be no antitrust issues. “There are still enough players of size” in the region, he continued.
Ellis says it is not unusual for Blues operations to have 20%, 30% or even 40% of market share in a particular area.
Doug Meyer, an analyst with Fitch in Chicago, said that if the deal happens, then it would be a good fit because in the health care market, membership concentration is important to success. Oxford has been mentioned as a takeover candidate quite often, he added.