HealthCareFinance.com
July 06,2015
Aetna buys Humana for $37 billion in largest-ever insurance merger.
The deal is also the fourth-largest consolidation in the American economy this year.
Aetna will pay $37 billion cash and stock to acquire Humana, the companies announced on July 3, in what will be the biggest health insurance merger to ever hit the industry.
“The acquisition of Humana aligns two great companies,” said Aetna chairman and CEO Mark Bertolini. “The complementary combination brings together Humana’s growing Medicare Advantage business with Aetna’s diversified portfolio and commercial capabilities to create a company serving the most seniors in the Medicare Advantage program and the second-largest managed care company in the United States.”
With Humana valued at $37 billion, or $230 per share, the deal is the fourth-largest consolidation in the American economy this year, ranking behind HJ Heinz’s $44 billion takeover of Kraft Foods and the pending $79 billion Charter-Time Warner deal. The acquisition is the largest consolidation in the global insurance industry, exceeding Swiss property and casualty giant ACE’s proposed $28 billion takeover of the Chubb Group and the $1.6 billion Anthem-WellPoint merger in 2004. Aetna said it will cover the costs through a combination of cash and stock, based on the company’s closing stock price of $125 on July 2.
[Also: Anthem, United eye big deals as game of thrones raises concerns]
The deal is part of an expected wave of consolidation in managed care and health insurance. Anthem may chase an acquisition of Cigna after its earlier $50 billion bid was rejected. Meanwhile, Centene, a growing St. Louis-based Medicaid managed care company, is going ahead with a $6.8 billion acquisition of Health Net.
Aetna told investors that the deal should yield $1.25 billion in 2018, along with higher operating earnings in 2017.
For health systems, the insurance industry consolidation brings cost containment and competitive pressures but it also creates opportunities for collaboration. A large part of Aetna’s accountable care strategy has involved new health plan networks designed and co-branded with health systems like Banner Health and Catholic Health Initiatives. Aetna is also helping some hospital systems launch their own health plans for their workforce and for regional employers.
If the deal is approved as a whole by regulators, Humana will bring Aetna’s membership to more than 33 million. Humana will add 3 million seniors on Medicare Advantage, as well as 4.3 million Medicare Part D drug plan customers, 1.1 million individual members (including some high-cost Affordable Care Act exchange populations in markets like Georgia), 1.8 million members in employer-sponsored plans, and more than 3 million military plan members