Diversified health care provider

UnitedHealth Group

(UNH) - Get Report

said it will acquire AmeriChoice for $560 million in stock and the assumption of $30 million in debt.

UnitedHealth expects to merge its Medicaid services business with AmeriChoice into a dedicated business unit working "exclusively with selected states" to provide services to Medicaid patients. The combined unit will function under the AmeriChoice name and be helmed by current AmeriChoice CEO Anthony Welters.

In a press release, UnitedHealth said the creation of the merged unit is "consistent with UnitedHealth Group's strategy of aligning assets and capabilities to form dedicated businesses focused on specific market opportunities and needs." The company added that the combined business will have pro forma Medicaid service revenue of more than $2 billion.

Assuming regulatory approval, the transaction will close in the fourth quarter of 2002, and according to UnitedHealth, it will immediately boost earnings by more than 5 cents a share annually.

Shares of UnitedHealth closed at $94 Monday before the news.