Cigna ‘Dramatically Overpaying’ for Express Scripts: Icahn

Activist investor Carl Icahn said shareholders in Cigna Corp. should vote against the $54 billion takeover of pharmacy-benefits firm Express Scripts Holding Co. because the health insurer is “dramatically overpaying” for the business.

“Cigna management is offering to pay an all-time high price for a company that, as a result of secular changes, is currently standing on very dangerous ground,” the billionaire investor wrote in an open letter to shareholders on Tuesday. “It’s a travesty to complete this deal.”

Icahn, who disclosed a 0.56% stake in Cigna, said the provider of health insurance to companies should pursue a multi-year partnership with firms such as Express Scripts — which help insurers and employers manage their prescription drug benefits — instead of a takeover, and use its cash to buy back shares.

A copy of Icahn’s letter is available here, and a related document is available here.

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Cigna agreed in March to a cash-and-stock deal for Express Scripts with the goal of streamlining different parts of the health care system by bringing them under one roof, saving money for clients of the combined firm.

Cigna’s request for shareholders to vote for the deal is available here.

Tight Deadline

The activist investor filed proxy material with regulators Tuesday soliciting votes against the deal, and to oppose postponing a special shareholder meeting slated for Aug. 24 if the company doesn’t have sufficient support for the transaction. Launching the proxy fight with a little more than two weeks until the vote is an unusual move for the activist. Such campaigns typically kick off months in advance in order to allow sufficient time to solicit other shareholders’ backing.

A representative for Cigna wasn’t immediately available for comment.

Icahn criticized the rationale behind the proposed tie up.

“We strongly disagree with the idea that Cigna’s only route to offering a more integrated solution is to make a $60 billion leveraged bet on a company with as many challenges as Express Scripts,” he wrote. Cigna’s stock could advance to become worth more than $250 a share “in a reasonable time frame,” while Express Scripts is currently worth less than $60 apiece, he argued.

Shares of Bloomfield, Connecticut-based Cigna closed Monday at $187.86 in New York while Express Scripts closed at $76.83.