The deal combines the two largest Blue Cross Blue Shield companies in the nation.

INDIANAPOLIS (AP) – Health insurer Anthem Inc. is buying bigger rival WellPoint Health Networks Inc. for about $16.4 billion in a cash and stock deal that would combine the nation’s two largest Blue Cross Blue Shield companies.

The new company would cover nearly 26 million people and operate in 13 states.

Indianapolis-based Anthem, the second-largest Blue Cross health insurance provider, will pay those who own shares in its larger rival $23.80 in cash and one share of Anthem common stock per WellPoint share.

Anthem closed at $77.26 a share on Friday on the New York Stock Exchange, boosting the value of the offer to $101.06 a share. That is a 20 percent premium over WellPoint’s share price of $83.93 on Friday.

In morning trading, WellPoint shares rose $6.57, or 7.8 percent, to $90.50 while Anthem shares fell $7.06, or 9.1 percent, to $70.20.

The merger was expected to be finalized by mid-2004 after approval from regulators and shareholders.

The combined company’s name will be WellPoint Inc., with the corporate headquarters in Indianapolis.

“This merger creates the nation’s leading health benefits company with an outstanding opportunity to set the industry standard and better serve our members, employer groups, physicians and hospitals, agents and brokers, and our communities,” said Leonard Schaeffer, chairman and chief executive officer of WellPoint.

Anthem has about 11.8 million members, about 2 million below the membership of Thousand Oaks, Calif.-based WellPoint.

Anthem is the Blue Cross and Blue Shield licensee in nine states: Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Colorado, Nevada and Maine, and part of Virginia.

WellPoint operates in California, Georgia, Missouri and Wisconsin.

Anthem and WellPoint are part of a federation of 42 independent locally operated Blue plans. The Blue plans started over 70 years ago and were originally all nonprofit organizations known as the insurer of last resort because they would enroll everyone regardless of their health.

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On the Net:

Anthem: www.anthem.com

WellPoint: www.wellpoint.com

AP-ES-10-27-03 1205EST