Cigna Shares Soar on Reports of $48 Billion Anthem Buyout

The deal, which could be announced as early as Thursday afternoon would value each share of Cigna at $188 for a total of $48 billion, according to The Wall Street Journal. An announcement could come later this week. Anthem and Cigna did not immediately respond to requests for comment. (HUM) for a combination of cash and stock valued at about $230 per Humana share or $37 billion earlier this month, a day after Centene Corp. Cigna said the offer was “inadequate and not in the best interest of [its] shareholders”. UnitedHealthcare, the current largest insurer, has about 45 million members, while the recently merged company between Aetna and Humana has about 33 million members (Johnson, “Wonkblog”, Washington Post, 7/22). There were also disagreements over who would lead the combined company in the future.

Cigna also said its rival was “facing a number of major issues”, including a lack of a growth strategy, complications relating to membership in the Blue Cross Blue Shield Association (BCBSA) and related antitrust actions, and other significant challenges, such as the massive data breach in February.

Joseph Swedish, Anthem’s chief executive officer, would run the combined company, one of the people said.

Analysts say that because of caps on the profit that insurers can make on their plans, the companies have been looking to cut administrative costs by increasing their scale. The states dictate overlap/market share based on their preference for market concentration, and any merger activity will likely result in a direct negotiation between the plans and states. In addition, bigger companies can have more influence negotiating with providers (“Wonkblog”, Washington Post, 7/22). There is no guarantee that regulators would bless such a deal as well as other potential mergers. A study of a merger between Aetna and Prudential found premiums increased by 7 percentage points after the deal.