Greenlight May Have Made $72 Million on Coventry

Updated on
Greenlight President David Einhorn
Greenlight Capital Inc. President David Einhorn Photographer: Peter Foley/Bloomberg

Greenlight Capital Inc., David Einhorn’s $7.7 billion hedge fund, may have made $72 million from its stake in Coventry Health Care Inc. as the shares surged, according to regulatory filings.

Coventry soared 20 percent today after Aetna Inc., the third-biggest U.S. health plan, agreed to buy the Bethesda, Maryland-based firm. Greenlight bought 6.66 million shares of Coventry in the second quarter, according to a filing with the U.S. Securities and Exchange Commission. The New York hedge fund told clients last month that it bought Coventry shares at an average price of $31.22. The holding is valued at $280 million today, assuming Greenlight didn’t reduce or increase its stake since the last filing.

Aetna today agreed to buy Coventry for about $5.6 billion to increase its share of business from government health plans following President Barack Obama’s health-care overhaul. Greenlight said in the letter to investors last month that Coventry and Cigna Corp. have unlevered balance sheets and trade at single-digit price-earnings ratios, making them cheap.

“They have no exposure to the European currency crisis, a possible Chinese slowdown or other cyclical headwinds,” Greenlight said in a July 23 letter to investors.

Share Premium

Aetna will pay $42.08 a share for Coventry, including $27.30 in cash and 0.3885 Aetna share, the companies said today in a statement. That represents a 20 percent premium over Coventry’s closing price of $34.94 on Aug. 17, which gave the company a market value of $4.68 billion. Including debt, the deal is valued at $7.3 billion. Coventry closed at $42.04 in New York today.

Aetna joins competitors WellPoint Inc. and Cigna Corp. in making acquisitions as the U.S. government expands medical coverage. WellPoint said last month it would buy Medicaid insurer Amerigroup Corp. for $4.9 billion, and Cigna bought Medicare specialist Healthspring Inc. for $3.8 billion in January.

Mitt Romney, seeking to defeat President Barack Obama in this year’s elections, has vowed to repeal Obama’s health-care overhaul after the U.S. Supreme Court on June 28 upheld the core of the legislation.

Greenlight returned 3.4 percent in the first half of the year, according to the letter. Hedge funds gained 1.1 percent, according to data compiled by Bloomberg. Jonathan Doorley, a spokesman for New York-based Greenlight, declined to comment.

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