The official announcement of an effort by Anthem Inc. (NYSE:ANTM) to acquire Cigna Corp. (NYSE:CI) has heated up discussions about whether the insurers can actually complete such a big deal and what it will mean for employees, consumers, health care providers, patients, and benefits advisors.
Anthem, the holder of the Blue Cross, and the Blue Cross and Blue Shield, licenses for many regions, has proposed paying $54 billion in stock and cash for Cigna in a deal that would link companies with a total of 53 million major plan enrollees, 89,000 employees, and direct or indirect contractual relationships with most U.S. providers that accept insurance.
The companies have filed copies of the deal announcements they are sending to a variety of interested parties, including employees, employers, and fellow Blue Cross and Blue Shield carriers, with the U.S. Securities and Exchange Commission (SEC).
Executives did not talk about agents, brokers or benefits consultants in the deal announcement, a deal presentation slidedeck or during a conference call about the deal with securities analysts, but Anthem included a copy of a sales call script aimed at employers and brokers in the flurry of SEC filings.
“Today’s announcement does not alter our day-to-day operations or our relationship with our employer or broker partners in any way,” Anthem says in the memo. The company says something similar in a letter to employers and brokers filed with the SEC.
In a set of talking points for sales, Anthem says it believes brokers would benefit from the increased efficiency, scale and reach of the combined company.
Anthem and Cigna have filed a copy of a Cigna letter to Cigna brokers emphasizing that coverage terms, sales contacts, and procedures will stay the same. “Business within the two companies will be conducted as usual because the companies remain separate and independent until closing,” Cigna says.
During the analyst call, Anthem executives made comments implying that integrating the two companies could be challenging for employees.
The companies have predicted that they could achieve $2 billion in “synergies,” or cost savings and revenue increases, by combining their operations.
Wayne DeVeydt, Anthem’s chief financial officer (CFO), said during the analyst call that Wall Street investors could have confidence in that projection because about $1.4 billion of the total would come in the form of savings on sales, general and administrative (SG&A) costs.
A big cut in SG&A costs could mean a big cut in payroll costs.
The companies are also facing questions about antitrust issues.
In the past, antitrust regulators have blocked some big corporate deals and, in other cases, forced the participating companies to divest themselves of key operations, to keep the combined company from becoming too dominant.
Anthem and Cigna have noted that their deal must go through a federal antitrust review process. During the analyst call, David Cordani, Cigna’s president, said in response to a question about antitrust issues and related issues that, “We take our fiduciary responsibility very seriously.”
“A deal of this size is always going to have items that are complex,” Cordani said. “And, fiduciarily, we need to make sure that we manage through that, gain the visibility, the opportunity to understand, because we’re seeking to build value over the long-term.”
Joseph Swedish, the Anthem president, said the companies have the sense “that we’ve got our arms around the integration challenges.”
“Our expectation is eyes wide open on the challenges,” Swedish said.