NEW YORK -- Aetna Inc. is in talks to sell its financial servicesand international divisions to the Netherland's ING Group, a movethat would enable the largest U.S. health insurer to concentrate onfixing its troubled managed care business.
As speculation grew about a deal, Aetna shares shot up 6.5percent Wednesday, or $4.063, to $66.75 on the New York StockExchange. Aetna confirmed the talks after the market closed but saidthere was no assurance that a deal would be reached.
ING, a Dutch investment bank and insurer, had attempted to buyall of Aetna in March in a joint bid with California managed careoperator Wellpoint Health Networks Inc. That $70-a-share offer wasrejected as too low.
With Aetna stock up more than 20 percent since March, Wall Streetanticipated an attractive offer for Aetna's financial services andinternational businesses.
The Aetna Financial Service unit sells annuities and pensionplans as well as providing pension and retirement plan managementservices. The Aetna International unit sells health and lifeinsurance and financial planning services in Asia, the Pacific Rim,and South America. The two divisions had combined revenue of about$2.3 billion in 1999, compared with about $18.5 billion for Aetna'shealth business.
Since rejecting the ING-Wellpoint takeover bid, Aetna has beentrying to sell much of its international business and spin off itsfinancial services and health insurance business into separatepublicly traded companies. Aetna officials pursued that strategyafter little success in selling both health insurance and pensionplans to big corporations.
William H. Donaldson, Aetna's chairman and chief executive, saidAetna now is working with ING on a new proposal. Meanwhile, Aetna'shealth care business faces problems including class-action lawsuits,rising drug costs and discontent among doctors and hospitals.
It is unclear what Aetna would do with its health care businessif it sells its other divisions.
Donaldson was noncommittal as to whether the health care businesswould also eventually hit the auction block. 'We remain committed toour stated goal of improving Aetna U.S. Healthcare's leadershipposition, financial performance and relationships with physicians,hospitals and patients,' he said.
Some institutional investors said they hoped Aetna would sellitself completely because just selling the financial services andinternational businesses would yield a huge tax bill for thecompany. Some said if Aetna can clean up its health care business,the company would attract buyers as well.
'Donaldson is doing exactly as he said he would,' said JohnSchneider, who manages Pimco Renaissance Funds, has substantialholdings of Aetna stock.
