Humana has farthest to fall if frozen out from deals

After climbing to a record amid growing takeover speculation, Humana stands to fall as much as 40 percent to $120 a share without a deal, said Chris Rigg of Susquehanna International Group. The company has missed analysts’ earnings estimates for three straight quarters and probably will reduce its guidance for 2015, the New York-based analyst said.

“Absent the M&A speculation, it would be significantly below $200,” Rigg said.

Humana fell 6.1 percent to $189.94 a share on Monday in New York. UnitedHealth declined 0.1 percent, while Aetna, Anthem and Cigna all gained.

UnitedHealth, with a market value of $114 billion, could go after Aetna to thwart an Aetna-Humana deal. That’s because if Aetna merged with Humana, the combined company would be too big for UnitedHealth to buy without raising antitrust alarms. A UnitedHealth-Humana deal isn’t an option because of the two companies’ significant overlap in Medicare Advantage, the private-company policies offered for the government-sponsored program for the elderly.

Still possible

Humana shareholders shouldn’t give up all hope just yet. Arnold of Cowen says an Aetna-Humana combination is still more probable than Aetna-UnitedHealth.

Bank of America analyst Kevin Fischbeck also puts a lower probability on UnitedHealth making an acquisition, mostly because it doesn’t need one as the biggest and fastest-growing health insurer.

For Humana, “I still think the most likely scenario is that they will get taken out by Aetna,” Rigg of Susquehanna said. He estimated a takeover valuation in the $200 range, but cautioned a bid could be for more like $180 if due diligence shows that Humana’s earnings are likely to fall.