(March 13) – “Embattled insurer Aetna Inc. said Sunday it is splitting in two, creating separate financial-services and health-care businesses, and it is likely to sell off certain pieces of its international business — all by year end,” write Carol Gentry and Nikhil Deogun in today’s Wall Street Journal.

“The board unanimously declined to enter negotiations with ING American Insurance Holdings Inc. and managed-care firm WellPoint Health Networks Inc., which had jointly approached Aetna late last month in hopes of a possible buyout.

“The proposed $70-a-share opening offer “was totally inadequate,” said Aetna Chairman William H. Donaldson in an interview. “This company is worth a lot more than $70.” Mr. Donaldson added that other “potential roadblocks” included the risk of opening the books to competitors and the difficulty of trying to make such a complex deal work. “But the main thing was the price.”

“Aetna’s stock has been selling for much less than $70 in recent months, but the board’s action indicates the company feels it can improve performance before the breakup occurs. ‘We believe we can realize the value in this company ourselves by restructuring,’ Mr. Donaldson said. ‘We have a sense of urgency, dedication and excitement. We’ll move as swiftly as we can.’

“Late Sunday night, Wellpoint issued a statement expressing disappointment about Aetna’s decision not to negotiate a sale of the company to Wellpoint and ING. Wellpoint said it continues to believe its joint proposal represents “outstanding value for Aetna’s shareholders.”

“The board’s decision to break up the company comes a little more than two weeks after its former chairman, Richard Huber, resigned under pressure amid a disappointing performance in the Aetna U.S. Healthcare unit and a persistently beaten-down stock price. It is the latest sign of problems roiling the managed-care business, which has been hit by surging drug costs, capped Medicare reimbursements, class-action lawsuits and political backlash.

“Aetna, Hartford, Conn., has come under intense pressure from institutional investors to take bold and immediate steps to boost its share price, with some large shareholders recently pushing the company to auction itself off in pieces. It isn’t clear how Wall Street will react to the breakup, as some shareholders may have been inclined to take $70 now rather than wait until Aetna goes through the cumbersome process of splitting into two companies.