Anthem Inc (NYSE:ANTM) announced on Friday that it is acquiring Cigna Corp in a transaction valued at $54.2 billion, an agreement that would form the largest health insurer in the US in terms of membership.
This is the biggest acquisition ever in the health insurance industry and came just three weeks after Aetna Inc acquired Humana for $37 billion. Following the roll-out of healthcare law by President Barack Obama, health insurers have been struggling to increase prices and cope with the rising expenses for an increasing list of innovative new treatments like few new cancer medicines that cost $100,000 on annual basis for patients.
Anthem’s CEO Joseph Swedish would become the chairman and chief executive officer of the combined company under the deal, which is expected to close during the second half of the next year. CEO at Cigna, David Cordani will become the new president and chief operating officer.
Swedish said in a mutual conference call with analysts that Anthem never discussed anything with regulators before the announcement of the deal, though it was confident about getting approval.
Anthem and Cigna are two of only four key insurers that run self-insured plans for big companies. The remaining two are Aetna and UnitedHealth Group. The joint company would have roughly 53 million members.
Increasing worries regarding market concentration emerged on the surface earlier this year when regulatory fears scuttled Comcast $45 billion proposal for Time Warner.
The transaction is valued at $183.36 a share based on ANTM’s Thursday close. Anthem reported that the offer is valued at $188 a share, based on its unaltered share price as of 28th of May before media reports came that the two companies were in discussions.
Anthem reported that the transaction will help it in lowering expenses and enable it to negotiate lower prices with hospitals and doctors.