One of the biggest health insurers in the US, Anthem, on Saturday announced an offer to acquire a rival, Cigna, for more than US$47 billion in cash and stock.
The move is the latest step toward an expected consolidation among health insurance companies. Last month, Humana, another competitor, was said to be exploring a sale of itself.
Driving the push to get bigger has been US President Barack Obama administration’s health care overhaul, which has bolstered revenues. Yet, at the same time, profit margins have come under pressure in the face of greater pricing transparency and less generous funding of government plans.
By going public with its offer, Anthem is seeking to stir up Cigna’s shareholders and force the company back to the negotiating table.
Anthem’s proposed takeover comes as the nation’s largest for-profit health insurers are all looking to combine, creating what Ana Gupte, an analyst at Leerink Partners, predicts will become an industry of the Big Three from the current five: Aetna, Anthem, Cigna, Humana and UnitedHealth Group.
UnitedHealth, the industry’s largest player, is already well diversified. In addition to providing health insurance directly to consumers as well as through employers, United’s Optum business includes companies offering a broad range of health and technology services.
While no one has ruled out United as a possible suitor, the company could run into regulatory hurdles, depending on what it acquired.
Drastic industry changes in recent years are fueling the interest in mergers. Growth from the traditional market of providing health coverage to employees has stalled as fewer companies provide insurance for their workers.
As a result, the insurers have steadily moved into the heavily regulated government markets of Medicare and Medicaid as well as the individual market under the Affordable Care Act.
The proposed deals represent the companies’ interest in trying to capture as much revenue growth as they can, Gupte recently told investors. The expectation is that the companies can use their larger size to be more efficient.
The proposed combination of Anthem and Cigna would create a much larger entity with US$115 billion in revenue.
Anthem operates well-known Blue Cross plans in 14 states and has a strong presence in offering Medicaid plans for low-income individuals.
Cigna is best known for offering plans through employers and selling other kinds of insurance like dental and disability.
However, unlike Cigna, Anthem has also been a major presence on the US’ public insurance marketplaces created by the federal health care law.
Under the offer, Cigna shareholders would receive US$184 a share, about 31 percent of that in Anthem stock and nearly 69 percent in cash. The offer represents a premium of 18 percent over Cigna’s closing stock price on Friday and a premium of 35.4 percent over its closing price on May 28, when reports of potential deals among health insurers emerged.
The offer gives Cigna an enterprise value of US$53.8 billion.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San