Health insurer Anthem to buy Cigna in $54.2 billion deal

The Fort Worth-based company owns US Airways and is folding that carrier into American on October 17. Shares of Cigna fell 4.6 percent to $147.30. This represents a 50 percent premium over StanCorp’s share price as of the close of business on Thursday.

Anthem Inc. said Friday it has agreed to acquire Cigna Corp. for $54 billion, creating the largest US health insurance company by enrollment. Anthem said it will pay $103.40 in cash and 0.5152 of its shares for every Cigna share. Antitrust officials said prior to the wave of mergers that if the deals went ahead, it would be mindful of the effect that consolidation will have on the shape of the overall industry (rather than considering each deal in isolation). This acquisition will better allow us to do what we’ve been doing in Maine for over 75 years – help keep health care coverage as affordable as possible and ensure our members have access to the highest quality, most effective care available.

Upon merging, there would only be three major players in the insurance industry: Aetna (AET), UnitedHealth (UNH), and of course, Anthem. “It will take a few time to see: 1) can they implement the mergers and achieve those savings and 2) is there still sufficient competition in the various markets that it won’t lead to price increases?”

Data and technology are playing a growing role in monitoring patients and care. Medicare Advantage plans are privately run, fast-growing versions of the federally funded program for people over 65 and the disabled. Anthem has also said Cigna’s private Medicare business is appealing.

UnitedHealth is now the biggest U.S. health insurer by membership, while Anthem and Cigna rank No. 2 and No. 4. It is part of the BCBS Association, which is made up of 37 different health plans that work together to create a national network of health insurance coverage. Anthem said it is “confident in its ability” to secure those approvals for a combination that is expected to draw close scrutiny on antitrust concerns.

Further, Cigna resisted a takeover from Anthem because of corporate governance disagreements, such as who would oversee the merged company. Another issue separating the two sides has been how many board seats Cigna would get in a combined company.

In June, Cigna rejected an offer from Anthem of $184 per share. “It will happen at local markets because the hospital industry is pretty fragmented”. The market appears split between those who think it will happen in September or December.

As well as monitoring developments in China and Greece, traders are turning their minds toward the U.S. Federal Reserve as they try to assess when the central bank will start raising interest rates.

A spokesman for Bloomfield, Connecticut-based Cigna declined to comment, while a spokeswoman for Indianapolis-based Anthem didn’t respond to a request for comment. “They were already concerned that there wasn’t enough competition”. “Scale is going to matter as you get into more risk-sharing”, said Glen Giovannetti, leader of global life sciences at Ernst & Young.