(Bloomberg) — Aetna Inc. agreed to buy Humana Inc., the second-largest provider of private Medicare insurance, for $37 billion in cash and stock to broaden its health-care coverage.
The transaction values Humana at $230 a share based on yesterday’s closing price for Aetna, the companies said in a statement Friday. That’s 23 percent above Humana’s last close.
The acquisition comes amid a period of consolidation in the industry, with all of the five biggest health insurers looking at deals. Humana’s 3.2 million Medicare Advantage members have made it a target, since more Americans are turning 65 and becoming eligible for the health program for the elderly and its private insurer-run version.
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“Medicare Advantage is a coveted space,” Michael Bernstein, a partner at Baird Capital’s U.S. private equity team who focuses on health care, said in an interview before the transaction was announced. “To develop a similar scale in Medicare would take a great deal of work and time, which would be bypassed by making that transaction happen.”
Terms of Deal
Humana shareholders will receive $125 in cash and 0.8375 of an Aetna share for each of Humana’s. Aetna’s shareholders will own about 74 percent of the combined company and Humana’s will own about 26 percent.
The deal is expected to close in the second half of 2016. Aetna’s chief executive officer, Mark Bertolini, will be chairman and CEO of the combined company.