Under the terms of the agreement, WellPoint will pay $92 a share for the managed care provider, a premium of 43% over its final Friday share price of $64.34.
WellPoint will fund the deal with cash and new debt. Company officials estimated the total value of the deal at about $4.9 billion, the Associated Press noted.
Shares of Amerigroup spiked more than 37% in early Monday trading, rising above $88, while shares of WellPoint rose about 4%.
The transaction is expected to close during the first quarter next year.
Government regulators and Amerigroup’s shareholders will have to okay the merger first.
With operations in 13 states, Amerigroup provides managed care for Medicaid recipients and others covered by state and federal medical care programs.
The acquisition will give WellPoint a beach head in the government-financed health care business, reaching more than 4.5 million Medicaid patients.