US health insurer Cigna to buy Express Scripts in $67-bn deal
08 March 2018
US health insurer Cigna today announced a $67-billion deal to acquire pharmacy benefits manager Express Scripts, adding to the list of mergers and acquisitions in the sector, as insurers try to tackle soaring healthcare costs.
The deal, which follows the $69-billion merger of insurer Aetna and drugstore chain CVS Health, announced last December, highlights a trend toward cost-control through merger of insurers with medical suppliers and healthcare providers.
Cigna said it would pay $54 billion for Express Scripts and assume its debt of approximately $15 billion, which would take the cash-and-stock deal to $67 billion.
Cigna said its offer represented a premium of nearly 31 per cent to Express Scripts' Wednesday closing price of $73.42.
The merger consideration will consist of $48.75 in cash and 0.2434 shares of stock of the combined company per Express Scripts share. The transaction was approved by the boards of directors of both companies.
''Cigna's acquisition of Express Scripts brings together two complementary customer-centric services companies, well-positioned to drive greater quality and affordability for customers,'' said David M Cordani, president and chief executive of Cigna.
''Together, we will create an expanded portfolio of health services, delivering greater consumer choice, closer alignment between the customer and health care provider, and more personalised value. This combination will create significant benefits to society and differentiated shareholder value,'' he added
''First and foremost, we believe this transaction delivers attractive value to the Express Scripts shareholders" said Tim Wentworth, president and chief executive of Express Scripts.
With a full portfolio of medical, behavioural, specialty pharmacy and other health engagement services across a wide array of retail and online distribution channels, the combined company will be able to deliver superior services while also driving long-term value creation for shareholders, Cigna said.
Cigna said the combined company will use its broad and proven network of delivery system partnerships and act as the connective tissue between individuals and their healthcare providers, providing a more coordinated approach to an individual's health care journey, reducing complexity and creating better outcomes.
Upon closing of the transaction, Cigna shareholders will own approximately 64 per cent of the combined company and Express Scripts shareholders will own approximately 36 per cent. The consideration represents an approximately 31 per cent premium to Express Scripts' Wednesday's closing price of $73.42.
The combined company will be led by Cigna's president and CEO David M Cordani as president and CEO. Express Scripts' president and CEO Tim Wentworth will assume the role of president, Express Scripts.
The combined company's board will be expanded to 13 directors, including four independent members of the Express Scripts board.
The combined company will be named Cigna. Cigna's headquarters in Bloomfield, Connecticut, will become the headquarters for the combined company, and Express Scripts will be headquartered in St. Louis, Missouri.
At closing, the combined company will make an incremental investment of $200 million in its charitable foundation, to support the communities in which it operates, and with the continued focus on improving societal health.
Cigna intends to fund the cash portion of the transaction through a combination of cash on hand, assumed Express Scripts debt and new debt issuance and Cigna has obtained fully committed debt financing from Morgan Stanley Senior Funding, Inc and The Bank of Tokyo-Mitsubishi UFJ Ltd.
The transaction is not subject to any financing conditions. Upon completion of the transaction, Cigna is expected to have debt of approximately $41.1 billion. Cigna expects to have a debt-to-capitalisation ratio of approximately 49 per cent following the acquisition, and aims to achieve a ratio in the 30s within 18 to 24 months after the transaction closes.
Cigna expects to maintain its investment grade ratings.
The transaction, which is expected to be completed by 31 December 2018, is subject to the approval of Cigna and Express Scripts shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. Until the closing, Cigna and Express Scripts will continue to operate as independent companies.
Morgan Stanley & Co. LLC is acting as sole financial advisor to Cigna while Wachtell, Lipton, Rosen and Katz is serving as legal counsel and Paul, Weiss, Rifkind, Wharton & Garrison LLP as regulatory counsel to Cigna.
Centerview Partners LLC and Lazard Frères & Co LLC are acting as financial advisors, while Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel and Holland & Knight LLP as regulatory counsel to Express Scripts.