Anthem seeks to buy Cigna for $47 billion
One of the biggest health insurers in the country, Anthem, on Saturday announced an offer to acquire a rival, Cigna, for more than $47 billion in cash and stock.
The move is the latest step toward an expected consolidation among health insurance companies. Last month, Humana, another competitor, was said to be exploring a sale of itself.
Driving the push to get bigger has been the Obama administration’s health care overhaul, which has bolstered revenues. Yet, at the same time, profit margins have come under pressure in the face of greater pricing transparency and less generous funding of government plans. Back to the table
By going public with its offer, Anthem is seeking to stir up Cigna’s shareholders and force the company back to the negotiating table. Anthem said it had been in talks with Cigna over a potential combination since August.
Those talks floundered, Anthem said in a statement, over “Cigna’s insistence on uncommon governance demands”— chiefly over the leadership and board structure of a combined company. In particular, Anthem cited the demand that David Cordani, the chief executive of Cigna, lead the combined company.
“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,” Joseph Swedish, the chief executive of Anthem, wrote in a letter to Cigna’s chairman.
Anthem’s proposed takeover comes as the nation’s largest for-profit health insurers are all looking to combine, creating what Ana Gupte, an analyst at Leerink Partners, predicts will become an industry of the Big Three from the current five: Aetna, Anthem, Cigna, Hu- mana and UnitedHealth Group. Regulatory hurdles
UnitedHealth, the industry’s largest player, is already well diversified. In addition to providing health insurance directly to consumers as well as through employers, United’s Optum business includes companies offering a broad range of health and technology services.
While no one has ruled out United as a possible suitor, the company could run into regulatory hurdles, depending on what it acquires.
Drastic industry changes in recent years are fueling the interest in mergers. Growth from the traditional market of providing health coverage to employees has stalled as fewer companies provide insurance for their workers.
As a result, the insurers have steadily moved into the heavily regulated government markets of Medicare and Medicaid as well as the individual market under the Affordable Care Act.