NEW YORK (Reuters) – WellPoint Inc (WLP.N) evaluated a leveraged buyout of the health insurer, but determined it would be difficult to pull off, the company’s chief financial officer said on Wednesday.
Asked at an investor conference about an LBO, WellPoint CFO Wayne DeVeydt said the company “evaluated and explored” the possibility, but determined “it’s not something we really can accomplish.”
WellPoint, the largest U.S. health insurer by membership, operates Blue Cross Blue Shield health plans.
DeVeydt said Blue Cross Blue Shield ownership rules that prevent one entity from having large stakes undercut the possibility of a buyout.
Another problematic factor is the amount of leverage the company would need to assume could risk its debt ratings — something that would worry its large national employer clients.
“We have two factors that make an LBO difficult, but definitely something that we evaluated and explored, because where our market cap was, with the cash we were generating, this seemed like a very unique opportunity,” DeVeydt said at the Citi investor conference, which was broadcast over the Internet.
WellPoint, with a market value of about $24 billion, has seen its shares fall some 45 percent since the start of 2008.
DeVeydt said the shares remained undervalued. The company has slowed its share buybacks because of the uncertainty of health reform, but DeVeydt said it would consider an accelerated share repurchase program once reform measures become more clear.
WellPoint’s board is also looking at the possibility of a dividend, DeVeydt said.
WellPoint shares were down 12 cents at $48.44 in afternoon trading on the New York Stock Exchange. (Reporting by Lewis Krauskopf; Editing by Andre Grenon)