Health insurers Anthem, Cigna Corp to merge in $54.2-bn deal
25 July 2015
US-based health insurance provider Anthem Inc said yesterday that it would acquire Cigna Corp, a major national health insurer with a workforce of 1,100, in a deal that would create the largest health-insurance company in the US.
|Anthem president and CEO Joseph Swedish (L)will serve as chairman and CEO of the combined company, with Cigna president and CEO David Cordani as its president and COO.|
The $54.2-billion transaction was one in a series of health-insurer mergers announced recently as firms attempted position themselves better in a rapidly changing marketplace.
The combined company would have over $115 billion in annual revenue and an enrollment of 53 million members. Shareholders of Cigna, headquartered in Connecticut, would receive cash and Anthem stock valued at $188 per Cigna share.
In view of the rapid consolidation underway among health insurers and providers such as hospitals, the deal between Anthem and Cigna would likely be closely examined by the Justice Department's antitrust division.
"It will get scrutiny because there already has been such a great amount of consolidation," said Theresa Loscalzo, comanaging partner of Center City's Schnader Harrison Segal & Lewis L.L.P, philly.com reported. "It is very difficult to know how this will play out before Justice has weighed in."
If the acquisition of Cigna by Anthem were to go through, United Health Group Inc, with 46 million members, would be down to second position among health insurers. Aetna Inc, last month, announced a $37 billion deal with Humana Inc which would make it the nation's third-largest health insurer, with 33 million members.
The definitive agreement the two companies had entered would see Anthem acquire all outstanding shares of Cigna in a cash and stock transaction in which Cigna shareholders will receive $103.40 in cash and 0.5152 Anthem common shares for each Cigna common share.
The total per share consideration equates to approximately $188.00 for each Cigna share based on Anthem's closing share price on 28 May, 2015, valuing the transaction at $54.2 billion on an enterprise basis.
The combined company will be an industry leader with enhanced diversification and capabilities to advance the transformation of health care delivery for consumers.
Following the transaction, Anthem will have more than $115 billion in pro forma annual revenues, based on the most recent 2015 outlooks publicly reported by both companies and will gain meaningful diversification covering approximately 53 million medical members with well positioned commercial, government, consumer, specialty and international franchises.
Upon the close of the transaction, Anthem president and CEO Joseph Swedish will serve as chairman and CEO of the combined company, with Cigna president and CEO David Cordani its president and COO.
In addition, effective upon closing, the Anthem Board of Directors will be expanded to 14 members. David Cordani and four independent directors from Cigna's current Board of Directors will join the nine current members of the Anthem Board of Directors.
The agreement provides an ''unaffected'' premium to Cigna's shareholders of approximately 38.4 per cent, based on the unaffected closing price of Cigna's shares on 28 May, 2015.
Under the terms of the transaction, the consideration consists of approximately 55 per cent cash and 45 per cent Anthem shares, and the combined company would reflect a pro forma equity ownership comprised of approximately 67 per cent ownership by Anthem shareholders and the remaining held by Cigna shareholders.
Joseph Swedish, president and chief executive officer of Anthem, said in a statement, ''We are very pleased to announce an agreement that will deliver meaningful value to consumers and shareholders through expanded provider collaboration, enhanced affordability and cost of care management capabilities, and superior innovations that deliver a high quality health care experience for consumers.
"We believe that this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve.
"The Cigna team has built a set of capabilities that greatly complement our own offerings and the combined company will have a competitive presence across commercial, government, international and specialty segments.
"These expanded capabilities will enable us to better serve our customers as their health care needs evolve.''