Anthem to buy Cigna for $54.2b

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Anthem to buy Cigna for $54.2b
The Anthem-Cigna agreement will create the largest US health insurer by membership.

New York - Antitrust authorities are expected to aggressively scrutinise how the combinations will affect competition for Medicare and individual and commercial insurance.

By Reuters

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Published: Sat 25 Jul 2015, 12:00 AM

Last updated: Sat 25 Jul 2015, 11:14 AM

Anthem said on Friday it would buy Cigna Corp in a deal valued at $54.2 billion, creating the largest US health insurer by membership.
The deal - the biggest ever in the health insurance industry - comes three weeks after Aetna agreed to buy Humana for $37 billion and is part of an industry-wide consolidation following the roll-out of US President Barack Obama's healthcare law.
Antitrust authorities are expected to aggressively scrutinise how the combinations will affect competition for Medicare and individual and commercial insurance. By most measures, US insurance markets are extremely concentrated. That means companies could have trouble selling assets if forced to do so by antitrust regulators.
Anthem said it expects the deal to close in the second half of 2016, indicating a long regulatory road ahead. Anthem and Cigna are two of just four major insurers that administer self-insured plans for major companies. The other two are UnitedHealth Group and Aetna.
UnitedHealth is currently the biggest US health insurer by membership, while Anthem and Cigna rank No. 2 and No. 4.
"When you go from four to three national players, that creates a significant issue," said Matthew Cantor of law firm Constantine Cannon.
Anthem said it was confident it would get all necessary regulatory and other approvals.
The combined company would have about 53 million members. UnitedHealth had 45.86 million members as of June 30.
Growing concerns about market concentration came into sharp focus earlier this year when regulatory concerns scuttled Comcast Corp's $45 billion bid for Time Warner Cable.
Anthem said it will pay $103.40 in cash and 0.5152 of its shares for every Cigna share.
The deal is valued at $183.36 per share based on Anthem's Thursday close of $155.21.
Cigna shares were up 0.2 per cent at $154.68 in premarket trading, while Anthem shares were up 0.5 per cent at $156.06.
The equity portion of the offer is valued at $49.11 billion, according to Reuters calculations based on 261.2 million Cigna shares outstanding as of March 31. - Reuters
Anthem said the offer is valued at $188 per share, based on its unaffected share price as of May 28 before reports that the two companies were in talks.
The company has said the acquisition will help it reduce costs and allow it to negotiate lower prices with doctors and hospitals.
The combined company will be led by Anthem chief executive Joseph Swedish. Cigna chief executive David Cordani will be president and chief operating officer.
Anthem's lead financial adviser is UBS Investment Bank. Credit Suisse also served as financial adviser, and White & Case as legal adviser.
Morgan Stanley is Cigna's financial adviser and Cravath, Swaine & Moore its legal adviser. - Reuters



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