Citigroup Upgrades Oxford Health to Buy

The health-benefits company is reportedly in advanced talks to buy WellChoice

Citigroup upgraded Oxford Health (OHP ) to buy from hold.

According to The Wall Street Journal, WellChoice is in talks to acquire Oxford Health. Analyst Charles Boorady says he's upgrading and raising the $56 target to $70 on these expectations. He expects M&A will remain strong industrywide, and he thinks another bidder might step in.

Boorady says WellChoice might pay up to $101 per share for Oxford in an all-stock deal. The deal would be neutral to WellChoice's earnings per share, a assuming 70 basis point margin expansion from synergy. He says his $70 target is based on shares trading at 14 times his $5.05 2005 earnings per share estimate, which assumes a 40% chance of a buyout at $101. Boorady sees WellChoice itself as an attractive take-out candidate, and reiterates its buy rating on WellChoice.

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