The directors of Wollongong-based health insurer ahm will recommend to its members they approve a $367 million acquisition offer by Australia's biggest private health insurer, Medibank Private.
Yesterday ahm and Medibank Private signed a merger implementation deed to begin the takeover process, which needs member approval.
An ahm statement said the decision by the directors to unanimously recommend that members support the proposal was based on an independent report suggesting it was in members' best interests.
The buy-out proposal is the first since the Federal Government decided to implement changes to the Medicare levy surcharge in May, which is expected to see millions of people leave private health cover and hasten consolidation of the industry.
There are 154,500 memberships - covering 311,000 people - with ahm, making it the eighth largest insurer in the country, while the Federal Government-owned Medibank Private covers 3 million people.
The aquisition would give Medibank Private a 31 per cent share of the national market, up from 28 per cent, a greater slice than that of the new fund formed by British-backed BUPA and MBF.
Medibank Private managing director George Savvides said his company intended to support ahm's existing businesses and Wollongong operations, maintain ahm as a separate brand and not "disturb" Wollongong staff whom he described as a "major strength of the company".
One reason Medibank has pursued the deal is that the emphasis on preventative health at ahm will boost Medibank's potential in that area. Mr Savvides is to visit the ahm office on Wednesday for discussions.
The United Services Union says the jobs of ahm's 350 Wollongong employees are at risk and has launched a petition to block the takeover of an "icon of Wollongong".
"I have not seen a merger where all the employees remain in employment," southern organiser Rudi Oppitz said. "Employees have been in contact over recent weeks and they are really concerned about their futures."
He also claims senior ahm executives who would be let go have been offered a "golden parachute" - an attractive financial deal of 12 months salary plus entitlements - in the lead up to yesterday's announcement.
Medibank Private say this is not true.
Chairman of ahm, Chris Doogan, said the deal was expected to lead to "an increase in employee numbers in Wollongong".
"Medibank's size will also assist in keeping any future premium rate increases lower than ahm would be able to achieve if it continued as an independent private health insurer."
The aquisition has led to criticism of the Federal Government - which approved the bid - with some business commentators arguing that as market regulator it should not participate in the consolidation of the sector, and that it has an unfair advantage over other interested providers.
It is understood ahm was also sought by NIB.
Finance Minister Lindsay Tanner denied privatisation of Medibank was a factor in approving the bid.
Yesterday, the work day at ahm's new Wollongong office ended with a staff function on its balcony, with neighbours reporting plenty of cheering and clapping.
An ahm spokeswoman said it was "unrelated to the Medibank proposal" and was a staff event to present awards.