Cigna (NYSE: CI ) and Humana (NYSE: HUM ) are in talks to combine in a stock-and-cash deal, the Wall Street Journal reported Wednesday afternoon citing people familiar with the matter. A deal to merge could be finalized by the end of the year, it was added.
The news sent shares of both health-insurance companies lower in mid-day trading, with Cigna last trading down 5.9% and Humana down 1.5%.
Cigna had revenue of about $181 billion last year, while Humana posted revenue of $93 billion.
In 2015, Cigna and Humana considered merging, yet Humana opted for a deal with Aetna. However, this alliance faced antitrust issues and was blocked by a judge. Consequently, Aetna was acquired by CVS in 2018. Another attempt to merge Cigna with Anthem (NYSE: ELV ), rebranded as Elevance Health (ELV), also fell through due to an unfavorable antitrust ruling.
To alleviate antitrust worries, Cigna is considering selling its current Medicare Advantage division, potentially bringing in billions through this divestment.
Commenting on the news, analysts at TD Cowen said news of the potential merger shouldn't come as a complete surprise following a report in November that Cigna was considering selling its current Medicare Advantage division. However, they see antitrust concerns as keeping a lid on the stock prices if a deal is ultimately announced.
"We believe an announcement is likely but certain to be challenged by antitrust regulators which will create an 18-24 month overhang and plausible 20-30% deal spread," the analysts commented.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.