Cypress-based PacifiCare Health Systems Inc. is being bought by rival UnitedHealth Group Inc. in what stands to be the biggest deal in Orange County this year and possibly the largest acquisition yet of a local company.
UnitedGroup is offering $2.2 billion in cash and 112 million shares for PacifiCare, making the deal worth $8 billion.
PacifiCare saw its shares surge 13% to $82 in midday trading Wednesday after word broke that United was set to make an offer for the operator of managed healthcare plans.
Trading in PacifiCare, and Minnetonka, Minn.-based United, also a managed healthcare service plan operator, was halted after the news.
PacifiCare has seen a turnaround in the past four years under Chief Executive Howard Phanstiel, who has introduced various plans and moved the company away from its old, narrow HMO image.
PacifiCare and other health plan operators also got a boost from a Medicare reform law passed in late 2003, which gave it and its rivals billions to introduce new products and lure seniors from traditional Medicare into managed care models.
The deal would be the latest in a round of consolidation by health insurers. They’ve been combining to get leverage with hospitals and drug companies.
