Cigna Ends Acquisition Talks with Humana Amid Price Disagreement

U.S. health insurer Cigna has abandoned its pursuit of a merger with rival Humana, citing an inability to reach a consensus on the acquisition’s price, according to two sources familiar with the matter. The proposed deal, which would have created a healthcare behemoth valued at over $140 billion based on market values, faced formidable antitrust scrutiny in an industry where consolidation has been closely monitored by regulators.

The discussions between Cigna and Humana, which came six years after regulatory authorities thwarted significant consolidations within the U.S. health insurance sector, concluded due to a failure to agree on financial terms, as reported by the Wall Street Journal. Despite this setback, sources suggest that a potential collaboration between the two companies remains a possibility in the future.

Following the termination of merger talks, Cigna announced its intention to repurchase an additional $10 billion worth of shares, bringing the total repurchase amount to $11.3 billion. This move resulted in a notable uptick in Cigna’s stock, with shares rising 12.1% to $290.07 in premarket trading on Monday. However, the company’s shares have experienced a 22% decline over the year, including a nearly 10% dip since reports emerged about the failed deal negotiations with Humana.

Related: Cigna CEO Sued For Efforts To Kill Anthem Deal

Cigna’s Chairman and Chief Executive Officer, David Cordani, expressed confidence in the value of the company’s shares, stating, “We believe Cigna’s shares are significantly undervalued, and repurchases represent a value-enhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes.”

In the wake of the abandoned merger, Cordani also noted that Cigna would explore bolt-on acquisitions aligned with its strategic objectives, as well as “value-enhancing divestitures.” Notably, the company is reportedly considering the sale of its Medicare Advantage business, which manages government health insurance for individuals aged 65 and older. This potential divestiture signifies a departure from Cigna’s previous expansion in this sector.

Humana has refrained from commenting on the matter, while Cigna did not respond to a Reuters request for comment regarding the terminated deal talks. Had the merger been successful, the combined entity would have gained increased scale to compete with prominent U.S. health insurance players such as UnitedHealth Group and CVS Health.

Source: Reuters