PacifiCare’s Shares Rise 10% on Takeover Talks

PacifiCare Health Systems Inc.’s stock rose 10% on Monday on speculation that the company, the nation’s largest Medicare health maintenance organization, is being targeted for a takeover.

PacifiCare’s widely traded nonvoting Class B shares rose $7.25 to $77 on Nasdaq. Earlier in the session, shares hit $85.50.

Santa Ana-based PacifiCare wouldn’t confirm or deny that it’s in merger talks, company spokeswoman Alexandra Warnier said.

PacifiCare would be a good fit with many large health insurers, said Jim Lane, an analyst with Warburg Dillon Read Inc. Lane rates the company’s shares a “strong buy” and has a 12-month target price of $99.

PacifiCare has been able to remain profitable even as other insurers stumbled with Medicare coverage.

“PacifiCare is a strong California franchise,” said Greg Crawford, an analyst at Fox-Pitt Kelton. “The big thing is always national accounts, and all of the players who want to be national players have a gap” in California.

Philadelphia-based Cigna Corp. is said to be the company interested in buying PacifiCare. Ted Detrich, Cigna’s vice president of investor relations, said the company doesn’t comment on speculation.

Though Cigna has a presence in California, “it’s not one of the top-tier players,” said Crawford, who has an “attractive” rating on PacifiCare.

Crawford said he believes it’s unlikely that Cigna would purchase PacifiCare. But he acknowledged that Cigna, the third-largest U.S. health insurer, isn’t dealing with the same issues as some of its big rivals who might be looking to strengthen their position in California.

Aetna Inc., the largest U.S. health insurer, finished a $1.05-billion acquisition of New York Life Insurance Co.’s health-care business in July, and now must try to integrate the purchase smoothly.

United HealthCare Corp., the second-largest health insurer, last month saw its planned acquisition of Humana Inc., originally valued at about $6.3 billion, fall apart after United took a $900-million pretax second-quarter charge.

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James Peltz and Michael Hiltzik take PacifiCare’s pulse. D7