Provident Life and Accident Insurance Company Enters into Strategic Alliance with Healthsource Inc.

Strategic Insights -

Provident Life and Accident Insurance Company of America has announced a broad strategic alliance with Healthsource Inc., under which Healthsource will acquire Provident's group medical business for $310 million in cash and Healthsource stock. This alliance aims to provide a superior range and quality of cost-saving managed medical care products to Provident's customers, leveraging the strengths of both companies. The deal will create a new Healthsource subsidiary, Healthsource-Provident, located in Chattanooga, and will involve over 2,000 employees joining Healthsource.

Key Takeaways:

  • Provident Life and Accident Insurance Company has entered into a strategic alliance with Healthsource Inc. to acquire Provident's group medical business for $310 million.
  • The alliance will create a new Healthsource subsidiary, Healthsource-Provident, with over 2,000 employees joining Healthsource.
  • Healthsource-Provident will offer a superior range and quality of cost-saving managed medical care products to Provident's customers.
  • The deal involves a cash payment of $210 million and the issuance of Healthsource 6.25 percent preferred stock, convertible into approximately 6.5 percent ownership in Healthsource.
  • J. Harold Chandler, President and CEO of Provident, will join the Healthsource board of directors.
  • The operation will remain virtually intact, with employees expected to remain in their current positions and locations under existing management.
  • Provident will continue to provide non-medical employee benefit-related products to the customers of both companies.
  • The alliance will create opportunities to apply Healthsource's managed care expertise to disability and other employee benefit areas at Provident.
  • Provident will ask its shareholders to approve conversion from a dual-class common stock structure to a single class of shares.
  • Provident will adjust its annual dividend to 72 cents from $1.04 per common share.
  • Provident will improve its cost structure by streamlining the company and reducing management layers and excess corporate overhead.

Statistics:

  • $310 million: The amount paid by Healthsource to acquire Provident's group medical business.
  • $210 million: The cash payment made by Healthsource to Provident.
  • $100 million: The value of Healthsource 6.25 percent preferred stock issued to Provident.
  • 2,000: The number of employees joining Healthsource as part of the alliance.
  • $10 million: The estimated reduction in annual expenses for Provident through cost-cutting measures.
  • 2,200: The approximate number of employees expected to work for Provident after the alliance.
  • $50 million: The one-time gain expected by Provident from the transaction.

Sources:

  • "Provident Life and Accident Insurance Company Enters into Strategic Alliance with Healthsource Inc." Business Wire, December 21, 1994.
  • "Healthsource Inc. to Acquire Provident's Group Medical Business" Business Wire, December 21, 1994.
  • "Provident Life and Accident Insurance Co. of America to Merge with Healthsource Inc." Business Wire, December 21, 1994.