By Jonathan D. Rockoff And Dana Cimilluca
Anthem Inc. boosted its takeover offer for Cigna Corp. and is
going public with the bid after the two sides failed to reach
agreement, the latest move in a frenzy of attempted mergers among
health insurers.
Anthem in a statement said it has offered $184 a share for
Cigna. That equates to about $47.5 billion for all the company's
stock that was recently outstanding. Anthem is making the
cash-and-stock offer public in an effort to put pressure on Cigna
through its shareholders, according to a person familiar with the
matter.
Cigna had no comment Saturday afternoon.
Anthem's pursuit of Cigna comes as Cigna and others are eyeing
Humana Inc., which has put itself up for sale. Aetna Inc. in the
last few days made a takeover proposal to Humana. It isn't clear
how much Aetna indicated it would pay.
UnitedHealth Group Inc., meanwhile, recently made a takeover
approach to Aetna.
It isn't clear what, if any, Aetna's response was.
The five big managed-care companies are jockeying for deals that
will enable them to get more efficient and better respond to
changes in the health care landscape in the U.S. brought on by the
Affordable Care Act and other developments.
Analysts says it is likely regulators will only allow one or two
such combinations.
Anthem, which is based in Indianapolis and until last year was
known as WellPoint, made a number of bids for Cigna privately in
June, according to a letter Anthem Chief Executive Joseph Swedish
sent to Cigna's board Saturday. The letter was released by Anthem.
Among other things, it details disagreement the two sides have over
the role Cigna CEO David Cordani would play in a combined company.
He wants to be CEO, if not immediately then after a period of time,
which Anthem refuses to guarantee.
The Journal had reported earlier this week that Anthem was
pursuing Cigna, and had bid about $175 a share, which was rejected,
and that Mr. Cordani's potential role was a sticking point.
Anthem's bid consists of about 31% of its own shares and the
rest in cash. About 76% of the combined company would be owned by
Anthem shareholders, while Cigna investors would own the rest,
according to the latest proposal.
Cigna is seeking a nearly 50-50 split of directors on a combined
company's board, Anthem said. Cigna also pushed for an offer price
split evenly between cash and stock, according to Anthem.
Anthem, which said it has been in negotiations with Cigna since
Aug. 2014, bemoaned what it called its rival's refusal to
"reasonably negotiate." It said the governance demands Cigna is
making are excessive, given the rich premium Anthem says it is
offering.
"We were stunned that the Cigna board continues to insist on a
guaranteed CEO position for Mr. Cordani over choosing to allow its
stockholders to realize the significant premium being offered," the
Anthem letter reads.
Anthem said it submitted four bids in June, the most recent, of
$184 a share, on Thursday.
Shares of Cigna, which is based in Bloomfield, Conn., closed
Friday at $155.30, giving the company a market value of $40
billion.
A combination would create a big player in the commercial
health-insurance business, with strong positions among individual,
small-business and big-employer clients. It would vault Anthem, the
nation's second-largest health insurer, closer to UnitedHealth in
size. Cigna's revenue last year totaled $34.9 billion, while
Anthem's was $73.9 billion. UnitedHealth had revenue of $130.5
billion, including its health-services arm, Optum, while Aetna's
was $58 billion and Humana's was $48.5 billion.
Anthem is a huge player in the individual and small-group
markets in the 14 states where it holds the rights to be the Blue
Cross and Blue Shield insurer. It also has a strong role among
national employers. Cigna, meantime, focuses closely on
self-insured commercial business and has a significant and growing
position overseas.
A merged company would have a bigger presence in the
fast-growing Medicare Advantage market, an area where both
companies have lagged behind competitors. Together, Anthem and
Cigna would have more than a million Medicare members. Anthem also
has a major presence in Medicaid.
An attempt to seal an Anthem-Cigna merger could be complicated
by Anthem's role as a Blue Cross and Blue Shield insurer,
however.
The Blue Cross and Blue Shield plans hold geographic rights to
use the Blue brand only in a particular area, and they also agree
to certain limits on their non-Blue business. It is unclear how
Anthem would manage the legacy Cigna business in states where
another insurer is the local Blue. In its letter, Anthem said it
was "confident in its ability to obtain regulatory approvals" and
this "includes matters related to the Blue Cross Blue Shield
Association."
Humana has held sale talks with companies including Cigna and
Aetna, people familiar with the matter have said. Humana, based in
Louisville, Ky., gets the bulk of its revenue from its business
administering the private version of the federal Medicare
program.
The company is seen as a prize because of its powerful Medicare
franchise, which is growing rapidly as baby boomers age into
eligibility and opt for these plans, known as Medicare
Advantage.
Aetna has been viewed by some industry analysts as the most
likely acquirer of Humana, and executives at Aetna have spoken
publicly about their interest in acquisitions.
Anna Wilde Mathews contributed to this article.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com, Dana
Cimilluca at dana.cimilluca@wsj.com, Dana Mattioli at
dana.mattioli@wsj.com and Liz Hoffman at liz.hoffman@wsj.com
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