Anthem offers $47 billion for Cigna as insurers race for a deal

Sat Jun 20, 2015 7:43pm EDT
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By Caroline Humer

NEW YORK (Reuters) - U.S. health insurer Anthem Inc (ANTM.N: Quote) said on Saturday it had offered $47 billion in cash and stock for smaller rival Cigna Corp (CI.N: Quote), signaling a pick-up in the industry's long-awaited consolidation.

The biggest U.S. health insurers are seeking acquisitions to boost membership in government-paid healthcare plans and the employer-based insurance that is Cigna's specialty. Being bigger can help them negotiate better prices and improved networks of doctors, they said.

Anthem's offer comes as Cigna, as well as insurer Aetna Inc (AET.N: Quote), are participating in an auction to acquire another rival, Humana Inc (HUM.N: Quote), according to a person familiar with the matter, who asked not to be identified because the sale process is confidential. Humana was first reported to be considering a sale in May.

Humana declined to comment. Aetna was not immediately available for comment. Cigna declined to comment on the Humana auction or the Anthem offer.

Anthem, the second largest U.S. health insurer, said in a statement it had made four offers for Cigna in June, but that the deal was stalled over Cigna Chief Executive David Cordani's role in the merged company. The Wall Street Journal first reported on the rejected offers last week.

In a letter published as part of the company's statement on Saturday, Anthem detailed its weeks-long attempts to reach a deal with Cigna, including the steps by which it raised its offer to $184 per share. Based on that price and 257,370,000 shares outstanding, the deal is worth about $47 billion.

Cigna shares closed on Friday at $155.26, down $1.15 or 0.7 percent, making the $184 offer a premium of about 18 percent. The offer consists of 68.6 percent cash and 31.4 percent stock.

CEO Joseph Swedish wrote that the company did not think investors supported Cigna's rejection of the deal because of Anthem's refusal to guarantee that the CEO role would eventually go to Cordani. The letter also said Cigna had refused to sign a two-week standstill agreement with Anthem that would prevent both sides from having other deal talks.   Continued...

The office building of health insurer Anthem is seen in Los Angeles, California February 5, 2015. REUTERS/Gus Ruelas