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Biotech / Medical : Oxford Health Plan (OXHP) -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (252)	11/24/1997 2:30:00 PM
From: Michael Burry	Respond to of 2068

Re: takeover status of Oxford Oxford's main attraction as a takeover candidate is geographic, as the latest push in HMO marketing is "national coverage." On this front, Oxford may look attractive, as it is well-positioned in the Northeast and cheap. Unfortunately, there is a limit to scale economies in the HMO industry; IOW, diminishing returns to size definitely applies. And three potential suitors - Aetna, Cigna, and especially Pacificare - have all recently reached the point of diminishing returns with their respective recent acquisitions. Further, all three have had severe indigestion from these acquisitions. As is often the case with small software companies, when the share price crashes, a chorus of "takeover" arises from the gallery. But the question remains, who? Pacificare especially would seem to benefit geographically from an acquisition of Oxford, but FHP was swept up first and Pacificare must deal with it. Finally, HMO mergers are almost by necessity friendly. The question therefore becomes, does Oxford want to sell out at these prices? From my research, definitely not. From my view, Oxford perceives that the shares have become drastically undervalued. A pure rumor of questionable validity was floated to me that low-level Oxford employees are buying up the stock. I have also received several testimonials from people close to the situation as to the integrity of Wiggins and the fact that he is deeply embarrassed by this whole mess. By all indications, he is jumping right back in to right past wrongs and move his baby back to the top of the heap. A much more likely scenario than a merger but that will reward current shareholders is that the shock of the disappointment wears off and the stock steadily climbs back to the mid 40's over the next 2 years. My minimum expectation is a double in 3 years, not a bad return. Now, I am biased, because I perceive the intrinsic value of Oxford to be much higher than the current levels. Hence, I would rather see the share price rise than see a takeover at unfair levels. Good investing, Michael Burry