Aetna Inc agreed to buy Humana Inc, the second-largest provider of private Medicare insurance in the US, for US$37 billion in cash and stock to broaden its healthcare coverage.
The transaction values Humana at US$230 per share based on Thursday’s closing price for Hartford, Connecticut-based Aetna, the companies said in a statement yesterday. That was 23 percent more than Louisville, Kentucky-based Humana’s last close.
The acquisition is part of a merger frenzy as the five biggest US health insurers look to get bigger.
The law known as Obamacare spurred deals by introducing rules that push insurers to look for savings and by creating millions of new customers.
Humana’s 3.2 million Medicare Advantage members made it a target: It was winning new business as more US citizens turn 65 and become eligible for the health program for the elderly and its private insurer-run version.
Medicare membership is projected to rise to 68.4 million in 2023, up 26 percent from this year, according to the US Centers for Medicare & Medicaid Services.
Humana covers more than 14 million people through commercial, Medicare and Medicaid plans.
Humana shareholders are to receive US$125 in cash and 0.8375 of an Aetna share for each of Humana’s. The companies expect the deal to close in the second half of next year. Aetna CEO Mark Bertolini is to be chairman and CEO of the combined company.
Aetna shares fell 2.6 percent on Thursday to close at US$125.51 in New York trading, while Humana dropped 2.9 percent to US$187.50. US financial markets were closed yesterday for the Independence Day holiday.
The deal is poised to be the biggest ever in the health insurance industry, according to data compiled by Bloomberg.
Still, it might soon be surpassed. Cigna Corp last month rejected a US$47 billion bid from Anthem Inc, saying the offer was not in the best interests of shareholders and Anthem executives were not fit to lead a merged insurance giant.
And UnitedHealth Group Inc, the biggest insurer, has considered whether to pursue deals with Cigna or Aetna, the Wall Street Journal reported last month.
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