Anthem to buy Cigna for $54.2b
new york — 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 industrywide 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. —