US health in­surer An­them pro­poses to pur­chase Cigna for US$184 per share


U. S. health in­surer An­them Inc. said it’s rais­ing its of­fer to buy smaller ri­val Cigna Corp. for about US$ 47 bil­lion, in­clud­ing cash and stock.

In­di­anapo­lis- based An­them said Satur­day it’s propos­ing US$ 184 per share, about 31 per­cent of that would be in An­them shares and the re­main­der in cash. The of­fer rep­re­sents a pre­mium to Cigna’s stock­hold­ers of 18 per­cent over Cigna’s clos­ing stock price on Fri­day. It said the bid also rep­re­sents a pre­mium of 35.4 per­cent based on the clos­ing price of Cigna’s shares on May 28 when re­ports of in­dus­try merger talks be­gan. An­them said the to­tal trans­ac­tion is val­ued at nearly US$ 54 bil­lion, in­clud­ing debt.

The an­nounce­ment comes as in­vestors have been spec­u­lat­ing for weeks about the pos­si­bil­ity of a ma­jor ac­qui­si­tion in a sec­tor where size is be­com­ing in­creas­ingly crit­i­cal. Health in­sur­ers also have been hoard­ing cash from re­cent strong quar­ters and do­ing lit­tle to tamp down merger talks. Last month, there were re­ports that another ri­val, Hu­mana, Inc., was ex­plor­ing a sale of it­self. Some an­a­lysts pre­dict that the na­tion’s five big­gest health in­sur­ance car­ri­ers, which also in­clude Aetna and Unit­edHealth Group, will even­tu­ally con­sol­i­date into three.

An­them said it has been in talks with Cigna, based in Bloom­field, Con­necti­cut, to ex­plore a po­ten­tial com­bi­na­tion since Au­gust 2014 and said it made its pro­posal public be- cause the com­pa­nies have not been able to come to an agree­ment. The com­pany also said it has sub­mit­ted four writ­ten pro­pos­als since early June, and made pre­vi­ous of­fers of US$ 174 per share and US$ 178 per share, ac­cord­ing to a let­ter writ­ten by An­them’s CEO Joseph Swedish to Cigna’s board of di­rec­tors that it made public Satur­day. But An­them said that a big stick­ing point has been what role David Cor­dani, CEO of Cigna, is seek­ing to have at the com­bined com­pa­nies.

In the state­ment, An­them said that the com­bined com­pany would be “an in­dus­try leader” with greater than US$ 115 bil­lion in an­nual rev­enue.

It noted An­them and Cigna to­gether “would gain mean­ing­ful diver­si­fi­ca­tion” cov­er­ing about 53 mil­lion com­bined med­i­cal mem­bers and strong com­mer­cial, gov­ern­ment, con­sumer and spe­cialty fran­chises.

Mean­while, Cigna would bring its lead­er­ship po­si­tion, broad ge­o­graphic reach and na­tional ac­count pres­ence as well as its ex­per­tise in many facets of the com­mer­cial mar­ket, An­them said.

“This com­bi­na­tion is the ab­so­lute best strat­egy for both or­ga­ni­za­tions to max­i­mize the po­ten­tial and lead the trans­for­ma­tion of the health care in­dus­try,” said Swedish in a state­ment.

He added, “We are dis­ap­pointed that Cigna’s in­sis­tence on un­com­mon gov­er­nance de­mands has im­peded the re­al­iza­tion of this com­bi­na­tion for share­hold­ers and all stake­hold­ers.”

Swedish said in the let­ter to the board that he would as­sume the CEO spot of the com­bined com­pany and that Cor­dani would take on the role of pres­i­dent and chief op­er­at­ing of­fi­cer and serve as co- chair­man with him for two years. Af­ter Swedish steps down as CEO, how­ever, there would be no guar­an­tee that Cor­dani would take the CEO spot. Cigna’s board has in­sisted that Cor­dani be im­me­di­ately ap­pointed CEO of the com­bined com­pany, he said.

Cigna’s spokesman Matthew Asen­sio de­clined to com­ment.

The health care in­dus­try is fac­ing in­tense pres­sure to squeeze out costs and find ways to cap­ture op­por­tu­ni­ties aris­ing from the Af­ford­able Care Act. An ever- larger share of the com­pa­nies’ busi­ness is tied to gov­ern­ment pro­grams and the health law’s ex­changes, where cost­con­scious in­di­vid­u­als buy their own plans. Get­ting big­ger also could give in­sur­ers in­creased lever­age in ne­go­ti­at­ing rates with hos­pi­tals, many of which have ex­panded through their own merg­ers.

The big health in­sur­ers have long been ex­pected by an­a­lysts to turn to merg­ers that will give them the heft to bet­ter com­pete as the in­dus­try evolves. And when The Wall Street Jour­nal first re­ported last month that Hu­mana Inc. is ex­plor­ing a sale of it­self, it be­came clear a con­sol­i­da­tion ef­fort in the in­dus­try was fi­nally un­der way in earnest.

Cigna’s shares closed down US$1.15 per share to US$155.25 Fri­day, while An­them’s shares were down 18 cents to US$ 165.06.

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