CareFirst valued at $2.27 billion by group


CareFirst BlueCross BlueShield is worth $2.27 billion - nearly $1 billion more than the sale price CareFirst negotiated for itself - according to a report to be released today by DC Appleseed, an advocacy group.

The Appleseed valuation, prepared by Harvard Business School professor Richard F. Meyer, is about a half-billion dollars higher than those done by investment bankers hired by the insurance commissioners of Maryland and the District of Columbia. Details of the report were not available yesterday, and officials from DC Appleseed could not be reached for comment.

The DC Appleseed Center for Law and Justice describes itself as "an advocacy organization dedicated to making the Washington metropolitan region a better place to live and work." It is an official party to the review by District of Columbia regulators of CareFirst's application to convert to for-profit operation and be sold to WellPoint Health Networks Inc. It has hired its own consultants; it also plans a report on the impact of the CareFirst deal on insurance consumers.

Because CareFirst, as a non-profit, is, in effect, owned by the public, the purchase price would go to health-related foundations or a similar public purpose.

Regulators in Maryland, Delaware and the District of Columbia, the jurisdictions where CareFirst runs the Blue Cross plans, will rule on whether the conversion and sale is in the public interest and whether the price is fair. If the regulators set a higher price than the $1.37 billion called for in the current sale agreement, WellPoint will have to decide if it wants to pay more or walk away from the deal.

Maryland Insurance Commissioner Steven B. Larsen is expected to issue his decision, which is subject to review by the General Assembly, as early as this week.

The Blackstone Group, investment bankers who were consultants to Larsen, said last month that CareFirst is worth $1.45 billion to $1.65 billion. That was an update of a report Blackstone did in August, when it offered a wide range of valuations, averaging $1.8 billion. The drop in value reflects a decline in health insurer stocks during the six months from the first Blackstone report to the update.

Cain Brothers, consultants to D.C. regulators, reported in January that CareFirst was worth $1.65 billion to $1.75 billion. Delaware regulators have also hired an investment banking consultant, with a report expected this year.

CareFirst negotiated a $1.3 billion price in 2001. WellPoint added $70 million to the price in January - equal to the amount of a bonus plan for CareFirst executives that was dropped after it became a focus of opposition to the deal.

WellPoint's investment banker, Gregory Sorensen of Banc of America Securities, testified before Larsen in January that $1.3 billion was "a fair number. We would call it an aggressive number now, given the changes in the marketplace."

Ken Ferber, a WellPoint spokesman, said yesterday, "We're very comfortable with our valuation and the revised Blackstone valuation."

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