Anthem to buy rival insurer Cigna

The $47m deal to create a merged entity would be 24% owned by Cigna shareholders

Anthem Inc offered to buy smaller health insurer Cigna Corp for about $47 billion (Dh172 billion) in what would be the industry’s biggest takeover ever.

The non-binding proposal is for $184 a share, about 31 per cent of which would be paid in Anthem shares and the rest in cash. That’s a 29 per cent premium to Cigna’s average closing price in the past 20 trading sessions. Anthem said Saturday that the total transaction value is $53.8 billion, including net debt.

The merged entity would be about 24 per cent owned by Cigna shareholders and would serve about 53 million members. Cigna has “no comment at this time,” said Matt Asensio, a spokesman for the company.

“It’s a decent premium,” Thomas Carroll, an analyst for Stifel Financial Corp, said in a phone interview. “The question investors will have now is how does this news change all the M&A speculation that’s out there swirling about?”

Consolidation wave

Health insurance companies are on the verge of a consolidation wave much like the pharmaceutical industry has been experiencing. Companies such as Anthem are searching for ways to cut costs and keep expanding profits amid a surge in enrolment from the Patient Protection and Affordable Care Act, also known as Obamacare.

Aetna Inc made a takeover proposal to Humana Inc in the past few days, the Wall Street Journal reported on Saturday, without saying where it got the information. Humana had a market value of $30.3 billion on Friday, compared with Aetna’s $43.3 billion.

Anthem, valued at $43.5 billion, was considering a takeover of Cigna or Humana, a person familiar with the matter said earlier this month. Stifel’s Carroll said he was surprised that it chose Cigna because Humana’s Medicare expertise would have been a good complement to Anthem, which focuses more on Medicaid. Medicare is the federal health programme for the elderly and disabled, while Medicaid covers the poor.