Cigna and Humana End Massive Merger Plans
Cigna and Humana have decided to call off their proposed merger, which would have created a healthcare conglomerate worth $140 billion, according to reports. The deal, if successful, would have positioned the combined entity as a strong competitor against UnitedHealth Group, the largest healthcare company in the nation with a market value of around $500 billion.
Reasons for the Merger Termination
The merger between Cigna and Humana fell through due to the inability to reach an agreement on price and other financial terms. Sources familiar with the matter revealed that the two companies could not reconcile their differences, leading to the termination of the deal. As a result, Cigna has shifted its focus towards pursuing smaller acquisitions instead.
Impact on Cigna's Market Value
The news of the failed merger had a significant impact on Cigna's stock value, causing it to drop nearly 10%. Investors expressed concerns about the wisdom of using the company's stock as currency in the deal, prompting doubts about the potential benefits of the merger.
Cigna's Perspective on the Merger
Despite the setback, Cigna still believes that a merger with Humana would have been feasible from a regulatory standpoint, even considering the Biden administration's strict stance on mergers. The company remains open to the idea of combining with Humana in the future, as it sees the potential for growth and expansion in the healthcare market.
Challenges Faced by the Merger
Antitrust experts had previously expressed skepticism about the merger's ability to gain approval from regulatory authorities. Even with the possibility of divestitures, there were concerns that the merger would harm competition and consumers. The Federal Trade Commission, in particular, has become more rigorous in evaluating mergers and is less inclined to accept arguments based on efficiency gains.
Alternative Strategy: Stock Buybacks
In light of the failed merger, Cigna has decided to pursue an alternative strategy by planning $10 billion worth of stock buybacks. This move aims to enhance shareholder value and demonstrate confidence in the company's future prospects.
Overall, the termination of the Cigna-Humana merger highlights the challenges and complexities involved in large-scale healthcare consolidations. While the merger would have created a formidable player in the industry, the inability to reach a mutually acceptable agreement underscores the importance of aligning financial terms and strategic objectives for such deals to succeed.
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By: kniemeyer@insider.com (Kenneth Niemeyer)
Title: Cigna and Humana Call Off $140 Billion Healthcare Merger
Sourced From: www.businessinsider.com/cigna-and-humana-abandon-140-billion-merger-plan-2023-12
Published Date: Sun, 10 Dec 2023 21:44:48 +0000
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