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Anthem said to be nearing deal to buy Cigna for $48 billion

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(Bloomberg) — Anthem Inc. (NYSE:ANTM) s near an agreement to buy rival Cigna Corp. (NYSE:CI) for about $48 billion, two people with knowledge of the matter said. A deal would create the largest health insurer in the U.S. after almost a year of talks.

See also: Anthem-Cigna $47 billion deal hinges on dueling CEOs’ tussle

Anthem will pay $187 a share for Cigna, said the people, who asked not to be identified because the talks are private. That compares with its most recent offer of $184 a share. Cigna closed Wednesday at $151.07 in New York, for a market value of about $39 billion. An announcement could come later this week, the people said.

“It was a reasonably good price to begin with,” Ana Gupte, an analyst at Leerink Partners in New York, said Wednesday in a phone interview. “Shareholders were happy with $184 even. And they were telling Anthem and Cigna to resolve their differences and get the deal done.”

An acquisition would add to a wave of consolidation sweeping over the health-insurance industry. Aetna Inc. (NYSE:AET) said it agreed to buy Humana Inc. (NYSE:HUM) for $35 billion earlier this month, a day after Centene Corp. (NYSE:CNC) said it struck a deal to acquire Health Net Inc. (NYSE:HNT) for $6.3 billion.

See also: Fitch: Big health deals may bring on small deals

The Patient Protection and Affordable Care Act (PPACA) is helping drive the mergers, in part by imposing tougher rules and limits on the industry’s profits.

See also: 5 ways PPACA cushion programs could drive dealmaking

“The Aetna-Humana deal left Cigna with many fewer dance partners, because both of those companies were potential merger candidates for Cigna,” Gupte said.

Pricing power

By buying Cigna, Anthem would gain more power to negotiate prices with hospitals and doctors, as well as with clients such as employers. Anthem has also said Cigna’s private Medicare business is appealing. Combined, the company would have about 53 million members, more than UnitedHealth Group Inc. (NYSE:UNH).

Joseph Swedish, Anthem’s chief executive officer, would run the combined company, one of the people said. The insurers tussled over who would lead the business, with one of the main sticking points what role David Cordani, Cigna’s 49-year-old CEO, would play. Another issue separating the two sides has been how many board seats Cigna would get in a combined company.

“The question is, what else have they been able to negotiate as far as the board seats and the future role for David Cordani,” Gupte said.

A spokesman for Bloomfield, Conn.-based Cigna declined to comment, while a spokeswoman for Indianapolis-based Anthem didn’t respond to a request for comment.


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