(Reuters) June 8, 2011 10:56am EDT - NEW YORK - WellPoint Inc. plans to buy privately held Medicare specialist CareMore to expand its presence in the U.S. government program for the elderly.

The deal advances WellPoint's plans to become a bigger competitor in Medicare, rivaling leaders UnitedHealth Group Inc. and Humana Inc., as it seeks to take advantage of the post-war Baby Boom generation becoming eligible for the program.

WellPoint did not announce the price, but The New York Times said it was about $800 million, citing unnamed sources.

The acquisition may signal increased deal activity that has been expected in the industry since the U.S. health care overhaul passed last year.

"It is good to see WellPoint return to the M&A market, which has slowed due to a tighter regulatory environment and the uncertainty surrounding health care reform," Oppenheimer & Co analyst Michael Weiderhorn said in a research note.

"We expect an industry consolidation to accelerate at some point due to the advantages the larger players have in this environment," he added.

The deal is expected to close by the end of the year, be neutral to 2012 earnings and add to profits in 2013 and beyond, WellPoint said on Wednesday. WellPoint shares were off 1% in morning trading, on a down day for health insurer shares.

CareMore, which is owned by private equity firm CCMP Capital Advisors, focuses on seniors, including Medicare Advantage plans as well as clinics. The Cerritos, California-based company, which is focused in California, Arizona and Nevada, serves about 54,000 Medicare Advantage members and operates 26 clinics.

WellPoint, the largest U.S. health insurer by membership, which runs Blue Cross and Blue Shield plans, reported 1.33 million senior members at the end of the first quarter.

WellPoint Chief Financial Officer Wayne DeVeydt told Reuters last year the company wanted to expand more into Medicare, calling it a "huge growth opportunity for us."

The insurer expects more than 1 million Baby Boomers will become eligible for the program every year through 2030 across the 14 states in which its Blue Cross and Blue Shield plans have a presence, it said on Wednesday.

(Reporting by Lewis Krauskopf, editing by Gerald E. McCormick and Derek Caney)

© 2010 Thomson Reuters. Click for Restrictions.


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