An­them re­veals $54 bil­lion of­fer for Cigna

Health in­surer makes its of­fer public amid deep ne­go­ti­a­tions


new york — Af­ter get­ting the cold shoul­der, U.S. health in­surer An­them Inc. said it’s rais­ing its of­fer to buy ri­val Cigna Corp. for $54 bil­lion, in­clud­ing debt.

On Satur­day, In­di­anapolis­based An­them said it’s propos­ing $184 per share, which it says rep­re­sents a pre­mium to Cigna’s stock­hold­ers of more than 35.4 per­cent based on the clos­ing price of Cigna’s share on May 28.

An­them said it has been in talks with Cigna, based in Bloom­field, Conn., to ex­plore a po­ten­tial com­bi­na­tion since Au­gust 2014 and said it made its pro­posal public be­cause 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 $174 per share and $178 per share, ac­cord­ing to the let­ter to Cigna’s board of di­rec­tors that An­them made public Satur­day.

In the state­ment, An­them said the com­bined com­pany would be “an in­dus­try leader” with greater than $115 bil­lion in an­nual rev­enue. It noted that An­them and Cigna to­gether “would gain mean­ing­ful diver­si­fi­ca­tion” cov­er­ing about 53 mil­lion com­bined med­i­cal mem­bers and strong com­mer­cial, gov­ern­ment, con­sumer and spe­cialty fran­chises.

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

Of­fi­cials at Cigna couldn’t be reached im­me­di­ately to com­ment.

In­vestors have been spec­u­lat­ing for weeks about the pos­si­bil­ity of a ma­jor ac­qui­si­tion in an area where size is be­com­ing in­creas­ingly crit­i­cal. Health in­sur­ers have also been hoard­ing cash from re­cent strong quar­ters and do­ing lit­tle to tamp down merger talks. An An­them ex­ec­u­tive told an­a­lysts last month that he thought the in­dus­try would con­tinue to con­sol­i­date.

The Wall Street Jour­nal also re­ported in late May that the Medi­care Ad­van­tage cov­er­age provider Hu­mana, based in Louisville, is con­sid­er­ing a sale. Shares of that com­pany soared well past $200 to reach all-time high prices. A few days later, Hu­mana said it was pulling out of a ma­jor health-care con­fer­ence, wouldn’t com­ment on merger ru­mors and would de­cline to com­ment un­til its sec­ond-quar­ter re­sults are re­ported in late July.

Scale or size is crit­i­cal for health in­sur­ers be­cause it gives them more ne­go­ti­at­ing power when they hash out rates with care providers. It also al­lows them to spread the costs of un­der­writ­ing and claims pro­cess­ing over a big­ger base of cus­tomers.

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