An­them steps up pur­suit of Cigna

The healthcare firm of­fers $54 bil­lion amid frus­tra­tion over lead­er­ship talks.

Los Angeles Times - - FRONT PAGE - By Chad Ter­hune chad.ter­hune@latimes.com Twit­ter:@chadter­hune

Healthcare gi­ant’s $54-bil­lion takeover bid aims to harvest ris­ing rev­enues from Af­ford­able Care Act.

Healthcare gi­ant An­them Inc. stepped up its pur­suit of ri­val Cigna Corp. with a $54-bil­lion takeover bid amid an in­dus­try­wide merger frenzy that could dra­mat­i­cally re­shape the in­sur­ance mar­ket.

An­them, the na­tion’s sec­ond-largest health in­surer, said Satur­day it had of­fered $184 a share for Cig­nain cash and stock, or $54 bil­lion, in­clud­ing debt. But An­them ex­pressed frus­tra­tion that talks had bro­ken down in re­cent days over the fu­ture role of Cigna’s chief ex­ec­u­tive.

The public move by An­them caps weeks of spec­u­la­tion about a flurry of po­ten­tial mega-merg­ers among the in­dus­try’s big­gest play­ers. It’s pos­si­ble another suitor could vie for Cigna, based in Bloom­field, Conn.

An­them said its com­bi­na­tion with Cigna would make $115 bil­lion in an­nual rev­enue and serve 53 mil­lion mem­bers. That would make it big­ger than in­dus­try leader United Health Group Inc. in terms of mem­ber­ship.

Cigna has been pur­su­ing a deal of its own for Hu­mana Inc., which is prized for its strong Medi­care Ad­van­tage busi­ness. Mean­while, United Health has ap­proached the third-largest com­pany, Aetna Inc., about amerger.

The com­pa­nies are look­ing to bulk up to bet­ter take ad­van­tage of ris­ing rev­enues from the Af­ford­able Care Act and the grow­ing pri­va­ti­za­tion of Medi­care and Med­i­caid.

The sec­tor has ben­e­fited from the health law’s ex­pan­sion of sub­si­dized, pri­vate cov­er­age and Med­i­caid, the joint state-fed­eral in­sur­ance pro­gram for the poor.

But ex­pand­ing mem­ber­ship and rev­enue haven’t trans­lated to big­ger prof­its for much of the in­dus­try. Health in­sur­ers are hop­ing con­sol­i­da­tion en­ables them to squeeze out more costs and ne­go­ti­ate bet­ter prices with hos­pi­tals, doc­tors and drug­mak­ers.

Many health ex­perts worry those sav­ings won’t be passed along to em­ploy­ers and con­sumers. These deals might also run into an­titrust scru­tiny from fed­eral of­fi­cials wor­ried about re­duced com­pe­ti­tion.

Satur­day, An­them ex­pressed con­fi­dence that its pro­posed merger could sat­isfy reg­u­la­tors and help drive down healthcare costs.

By go­ing public with its of­fer, An­them is try­ing to pres­sure Cigna to drop its de­mands con­cern­ing top man­age­ment and reach an agree­ment. An­them said its of­fer rep­re­sented a 35% pre­mium to Cigna’s clos­ing price on May 28, when deal ru­mors sent many health in­sur­ance stocks soar­ing.

An­them said it has been ex­plor­ing a deal for Cigna since Au­gust. This month alone, it sub­mit­ted four dif­fer­ent bids, start­ing at $174 a share and rais­ing it to $184 now.

But a big stick­ing point ap­pears to be a fu­ture role for Cigna Chief Ex­ec­u­tive David Cor­dani.

An­them Chief Ex­ec­u­tive Joseph Swedish said he would serve as chief ex­ec­u­tive of the com­bined com­pany for two years. Cor­dani would be his No. 2 as pres­i­dent and chief op­er­at­ing of­fi­cer.

Af­ter that pe­riod, Cor­dani would be a can­di­date for the top job— but noth­ing is guar­an­teed, ac­cord­ing to An­them.

“We were stunned that the Cigna board con­tin­ues to in­sist on a guar­an­teed CEO po­si­tion for Mr. Cor­dani over choos­ing to al­low its stock­hold­ers to re­al­ize the sig­nif­i­cant pre­mium be­ing of­fered,” Swedish said in a let­ter to Cigna’s board Satur­day.

“With the co­op­er­a­tion of Cigna man­age­ment and boardof di­rec­tors, we ex­pect that we could reach a mu­tu­ally agree­able and ne­go­ti­ated trans­ac­tion by the end of June,” Swedish added.

A Cigna spokesman de­clined to com­ment Satur­day.

An­them sells Blue Cross plans in Cal­i­for­nia and 13 other states. It also has a big Med­i­caid man­aged-care busi­ness in many states.

An­them, based in In­di­anapo­lis, is the largest for­profit health in­surer in Cal­i­for­nia and leads the Cov­ered Cal­i­for­nia ex­change in en­roll­ment. Cigna is the na­tion’s fifth-largest health in­surer and has a smaller pres­ence in Cal­i­for­nia.

Dar­ron Cum­mings As­so­ci­ated Press

AN­THEM said a Cigna merger would earn $115 bil­lion in an­nual rev­enue and serve 53mil­lion mem­bers.

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