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5995 Plaza Drive
For Immediate Release Cypress, California 90630
Tel. (800) 631-0969
News Release
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CONTACT: Tyler Mason Dan Yarbrough Cliff Bowers
PHS Media Relations PHS Investor Relations AMZ Investor/Media Relations
Tyler.mason@phs.com Dan.yarbrough@phs.com Cliff.bowers@eAMS.com
(714) 226-3530 (714) 226-3540 (920) 661-2766
PacifiCare Health Systems Signs Definitive Agreement
To Acquire American Medical Security Group, Inc.
o Acquisition by PacifiCare will add 314,000 commercial PPO
lives, representing commercial membership expansion of more
than 13%
o American Medical Security Group shareholders will receive
$32.75 per share in cash
o Strengthens PacifiCare's position in individual and small group
segments
o Expected accretion increases PacifiCare's 2005 net income
guidance to $360-$375 million
CYPRESS, Calif., September 15, 2004 -- PacifiCare Health Systems, Inc. (NYSE:
PHS) and American Medical Security Group, Inc. (NYSE: AMZ) jointly announced
today that they have signed a definitive agreement whereby PacifiCare will
acquire all of the outstanding shares of common stock of American Medical
Security (AMS) through a cash merger in which AMS will become a wholly-owned
subsidiary of PacifiCare. Under the terms of the merger agreement, PacifiCare
will pay $32.75 in cash for each share of AMS common stock outstanding, for a
total equity purchase price of approximately $502 million on a fully diluted
basis. PacifiCare will also assume approximately $30.2 million of AMS debt.
PacifiCare will finance the acquisition through $400 million of term debt from
a $750 million bank commitment and the use of internally generated cash. The
new $750 million bank facility will include $550 million of term debt, $150
million of which will be used to refinance the company's existing term loan,
and a new $200 million unutilized revolving credit facility.
Headquartered in Green Bay, Wisconsin, with approximately 1,400 employees, AMS
provides a variety of individual and small group insurance products to members
in 33 states and the District of Columbia through a network of more than
32,000 independent agents. With more than 314,000 commercial PPO members, AMS
generated $712 million in total premium revenue in 2003.
"This transaction represents an excellent opportunity for PacifiCare to
enhance its commercial growth strategy," said Chairman and Chief Executive
Officer Howard Phanstiel. "We believe the strength of American Medical
Security Group's business, management and employees will provide us with an
efficient and scalable operations platform for our rapidly growing individual
and small group customer segments. The acquisition will add new proprietary
products to our arsenal, including health savings accounts (HSAs) and group
life products. And, it will help us to continue to diversify the company by
creating a better balance between our commercial and Medicare businesses."
AMS Chairman, President & Chief Executive Officer, Samuel V. Miller, and
members of his management team, will continue to lead AMS operations after the
merger.
Miller stated, "The underlying mission of AMS has been to create value for our
shareholders. This merger accomplishes that objective while also being
beneficial for our employees, policyholders and agents.
"PacifiCare and AMS are a compelling strategic fit. PacifiCare has exciting
plans to leverage this new partnership, taking full advantage of the
operational, financial and human-resource strengths of our successful
enterprise. We are committed to the successful implementation of those plans
and PacifiCare's broader strategies," Miller said.
It is anticipated that the acquisition will be completed by early 2005,
subject to approvals of AMS shareholders, the Wisconsin and Georgia
Departments of Insurance, and compliance with provisions of the
Hart-Scott-Rodino Act, as well as other customary approvals. PacifiCare
expects that the acquisition will be accretive to earnings in 2005. As such,
assuming completion of the transaction, the company is raising its 2005 net
income guidance to a range of $360 to $375 million from a range of $350 to
$360 million.
PacifiCare and AMS will hold a conference call to discuss the transaction at
9:00 AM Eastern time on Wednesday, September 15th. To access the call, dial
(800) 857-4546, passcode "PacifiCare." A replay of the call will be available
through October 6th, 2004 by dialing (800) 348-3538.
Risk Factors Regarding Forward-Looking Statements
The statements in this news release, including those made by Howard Phanstiel
and Samuel Miller, that are not historical facts are forward-looking
statements within the meaning of the Federal securities laws, and may involve
a number of risks and uncertainties. Such forward-looking statements include,
but are not limited to, the companies' ability to execute growth strategies,
the perceived benefits of the acquisition, the ability to diversify
PacifiCare's business, the expectations about the timing and receipt of
regulatory and shareholder approvals, statements regarding plans, objectives
and expectations with respect to future operations, products and services and
future performance and net income guidance for PacifiCare for 2005. These
risks and uncertainties include, but are not limited to: those found in
documents filed by PacifiCare and AMS, respectively, with the Securities and
Exchange Commission; the ability to implement certain growth or
diversification strategies; our ability to consummate the merger; the ability
to obtain the expected operating efficiencies in the merger within the
expected time frame and to integrate successfully into its operations; risks
that such integration may be more difficult or costly than expected; revenue
following the transaction and other actual results associated with the
acquisition of AMS that could differ from the perceived benefits; customer
loss and business disruption may be greater than expected in the transaction;
and required regulatory approvals for the transaction may not be obtained on a
timely basis or may be subject to certain conditions.
PacifiCare Health Systems and American Medical Security Group and their
respective officers and directors may be deemed to be participants in the
solicitation of proxies from shareholders of American Medical Security Group,
Inc. with respect to the transactions contemplated by the merger agreement
between PacifiCare and American Medical Security Group. Information regarding
the companies' officers and directors is included in their respective
Definitive Proxy Statements for their 2004 Annual Meetings of Stockholders
filed with the Securities and Exchange Commission in April 2004. These
documents are available free of charge at the Securities and Exchange
Commission web site at www.sec.gov, from PacifiCare at pacificare.com and from
AMS at eAMS.com. Investors and security holders may obtain more detailed
information about who may be deemed participants in the solicitation of
proxies by reading the AMS proxy statement when it becomes available.
Furthermore, investors and security holders of American Medical Security Group
are urged to read American Medical Security Group's proxy statement regarding
the proposed merger when it becomes available. It will contain important
information about the merger and the transactions contemplated by the Merger
Agreement. Investors and securities holders of American Medical Security Group
may obtain a free copy of American Medical Security Group's proxy statement
when it is available and other documents filed with the Securities and
Exchange Commission at the Commission's web site at www.sec.gov. American
Medical Security Group's proxy statement and these other documents may also be
obtained for free from American Medical Security Group at eAMS.com.
PacifiCare Health Systems is one of the nation's largest consumer health
organizations with than 3 million health plan members and approximately 10
million specialty plan members nationwide. PacifiCare offers individuals,
employers and Medicare beneficiaries a variety of consumer-driven health care
and life insurance products. Currently, more than 99 percent of PacifiCare's
commercial health plan members are enrolled in plans that have received
Excellent Accreditation by the National Committee for Quality Assurance
(NCQA). PacifiCare's specialty operations include behavioral health, dental
and vision, and complete pharmacy and medical management through its wholly
owned subsidiary, Prescription Solutions. More information on PacifiCare
Health Systems is available at pacificare.com.
American Medical Security Group, through its operating subsidiaries, markets
health-care benefits and insurance products to small businesses, families and
individuals. Insurance products of American Medical Security Group are
underwritten by United Wisconsin Life Insurance Company. The company serves
customers nationwide through partnerships with professional, independent
agents and quality health care providers.