Cigna, Humana explore healthcare megamerger - WSJ

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Cigna, Humana explore healthcare megamerger - WSJ
Credit: © Reuters.
(Updated - November 29, 2023 2:45 PM EST)

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%.

If an agreement is reached, the merged company would rival UnitedHealth Group (NYSE: UNH ) and
CVS Health (NYSE: CVS ) in size.

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.

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