The companies at the top of America's health insurance food chain are hurdling toward what could be some of the largest consolidation deals ever in the healthcare industry.
A $45 billion price tag for a health insurer with 14.5 million customers? That's the apparent bid for Cigna, but so far not enough, it seems. Anthem has been trying to buy Cigna and most recently offered $175 a share, reported the Wall Street Journal, citing sources among the parties.
"The companies have been in discussions for months and within the past 10 days Anthem has made two takeover bids for Cigna, the last at about $175 a share, according to one of the people," the Wall Street Journal quoted "Anthem's efforts have been rebuffed by Cigna."
The price of $175 per share would value Cigna at some $45 billion--more than the company's 2014 revenue of $34.9 billion and its market capitalization of $39 billion. Shares at Connecticut-based Cigna shot up 12 percent to $153.74 on the news of the rumor, while Anthem shares rallied by 2 percent to $164.22.
The Journal also reported that UnitedHealth Group is making bids for Aetna. "UnitedHealth made a preliminary takeover approach to Aetna Inc. in the last few days, people familiar with the matter said. Given Aetna's market value of about $42 billion, any deal for the company would likely be valued at least that high," wrote Dana Cimilluca, Dana Mattioli and Anna Wilde Mathews.
A sense of looming consolidation is growing among health insurers, particularly the for-profits. Other rumors of deal making hypothesize that Cigna could be out to make its own acquisition, as it did with the $3.8 billion takeover of Medicare Advantage plan HealthSpring in 2012. One target could be Humana, which has apparently put itself on the market with the help of M&A guru Goldman Sachs.
The buzz that consultant John Gorman hears is that "Anthem is leaking Cigna talks to drive down" Humana's stock price. "Bidding war with Aetna?" he wonders.
The rumored bid of $45 billion for Cigna shows how much managed care is currently valued on Wall Street.
When Aetna bought Coventry in 2012 for $5.7 billion, the Bethesda, Md.-based company had 5.5 million members, including 1.5 million in Medicare Part D drug plans, and $543 million in earnings on $12 billion in revenue. Last year, Cigna posted $2.1 billion in net income on just under $35 billion revenue.
Humana's major assets include its large Medicare Advantage customer base and an integrated provider strategy to serve those seniors in states like Florida. Cigna has a sizable administrative services line for large employers and also a big international and expat business, with about 1.3 million lives.
While Anthem recently overtook UnitedHealth Group as the largest health plan by membership (excluding Medicare Supplemental plans), UHG is still very much the giant of managed care and arguably more diversified thanks to its bustling Optum subsidiary. UHG's $130 billion in 2014 revenue far surpasses Anthem's $74 billion, Aetna's $58 billion, Humana's $48 billion and Cigna's $35 billion.