When Wall Street's biggest M&A dealmaker is hired, it would seem that a takeover is in the making, or at least a possibility being mulled.
Humana executives are putting the 54-year-old company up for sale, with Goldman Sachs brought in as an advisor, according to the Wall Street Journal. Humana's shares hit an all-time high of $219 when the news came, on the last Friday in May.
The sale of Humana, which is valued at more than $25 billion, would almost certainly be the largest health insurance acquisition since the $20 billion merger of Anthem and WellPoint in 2003.
Among the possible buyers are Aetna and, in what would be more of a merger, Cigna, according to the Wall Street Journal and managed care analysts. (Another hypothesis is that Walmart could acquire Humana.)
While Humana executives could always opt not to go forward and set a course for another 50 years, the company's stock price suggests a keen investor interest in new deals.
The Louisville-based insurer has the second largest membership in one of the fastest growing segments, Medicare Advantage. Humana's 3 million Medicare Advantage customers and 7 million Part D members added to another national insurer's membership would rival UnitedHealth Group's 3.2 million Medicare Advantage population.
Brian Kane, Humana's CFO since 2014, is also a 17-year Goldman Sachs M&A veteran who worked on deals such as Aetna's $7.3 billion acquisition of Coventry and Amerigroup $4.9 billion sale to WellPoint.
One uncertain factor for the buyer might be the outcome of a Justice Department investigation into Humana's risk adjustment practices, although any future settlement presumably could be affordable for a company with more than $50 billion in annual revenue.
Either way, and beyond Humana, with the Affordable Care Act's medical cost ratio effectively capping insurer's profit margins, publicly-traded insurers are going to have to increase membership to grow earnings in the long-term.
"We view this step as a trigger event in a managed-care industry overdue for consolidation," as Leerink Partners analysts wrote recently. "We expect the next year will see multiple strategic actions among the major players."