NU Online News Service, April 26, 2004, 6:12 p.m. EDT – UnitedHealth Group Inc., Minnetonka, Minn., has offered $4.9 billion, or more than $3,500 per insured commercial health plan member, for Oxford Health Plans Inc., Trumbull, Conn.[@@]

The deal price includes $1.4 billion in cash and about $3.5 billion in UnitedHealth stock, Oxford says.

The deal is subject to approval by Oxford shareholders and many different regulators.

In the late 1990s, Oxford suffered through such serious financial and accounting woes that one securities analyst questioned whether any qualified bidder would offer to acquire the company at any price.

Since then, executives have turned Oxford around, and the company’s profits have soared.

Oxford is reporting $86.7 million in net income for the first quarter on $1.4 billion in revenue, up from $72.9 million in net income on $1.3 billion in revenue for the first quarter of 2003.

The company ended the latest quarter insuring the health of 1.4 million residents of Connecticut, New York and New Jersey and administering coverage for another 107,500 “tri-state” residents.

UnitedHealth has announced its offer just days after WellChoice Inc., New York, reported that it had ended its effort to acquire Oxford.

UnitedHealth recently paid $3 billion, or about $3,000 per insured commercial life, for another successful regional health carrier, Mid Atlantic Medical Services Inc., Rockville, Md.

Oxford has had a reputation for offering rich, flexible health benefits, but it has had to compete head-to-head in the New York City area with the big national carriers and WellChoice, the parent of Empire Blue Cross Blue Shield, which has access to a national coverage consortium for members of the Blue Cross and Blue Shield Association, Chicago.

Oxford President Charles Berg says the UnitedHealth deal will help Oxford go after the many national employers and other multilocation employers that have operations both inside and outside the tri-state region.

The deal agreement calls for Oxford to operate under the Oxford name as a wholly owned subsidiary of UnitedHealth. Berg and most other senior Oxford managers would stay with Oxford, and the company would keep its Connecticut headquarters.

Standard & Poor’s Ratings Services, New York, has affirmed its A credit rating for UnitedHealth and suggested that it might increase Oxford’s BB plus credit rating if UnitedHealth can complete the deal.

The proposed deal “does have a degree of acquisition risk because of increasing goodwill and operations integration,” S&P says in a comment on the deal.

But both companies are doing well, and completing the deal would give the combined company a greatly enhanced competitive position in the New York area, the rating agency says.