Cigna and Humana in Talks Over Potential Blockbuster Merger

Cigna Corp. and Humana Inc., two of the U.S.' largest health insurers, are in advanced discussions over a merger that could reshape the health insurance landscape.

Based on respective market values, a deal would create a combined entity worth more than $140 billion. It would also provide the two insurers with meaningful scale as they look to compete against rivals UnitedHealth Group and CVS Health.

It's not the first time Cigna and Humana have considered transformative deals. The pair had previously discussed a tie-up in 2015 but called off the combination in favor of other suitors. Humana came close to a merger with Aetna, though the deal was ultimately scrapped following antitrust litigation, as was a separate merger attempt between Cigna and Anthem.

Cigna, headquartered in Bloomfield, Connecticut, recorded $181 billion in revenue last year. Led by a strong commercial insurance business, the group has also been buoyed by its $54 billion Express Scripts acquisition, positioning Cigna as one of the biggest players in pharmacy benefits.

Louisville-based Humana booked $93 billion in revenue last year and has increasingly focused on its market-leading Medicare Advantage business (second only to UnitedHealth), supported by a network of proprietary primary-care clinics and home-health offerings.

Humana had earlier this year announced its intention to spin off its commercial business in favor of increased focus on the core Medicare Advantage offering. Meanwhile, Cigna had reportedly been evaluating strategic options for its own Medicare Advantage unit, potentially easing antitrust concerns and opening up a clearer path for what would otherwise be an unlikely merger.

Alongside the opportunity to consolidate market position, the potential merger could bolster the entity's ability to negotiate pricing and contracts with providers. That's on top of the more traditional cost synergies that would likely come out of consolidated operations.

Market reaction from both sets of shareholders has been mixed, with investors cautious amidst what is likely to be a prolonged antitrust process, should a deal even be reached.

The companies hope to finalize the transaction by the end of this year, with an anticipated close at some point within the next 12 to 24 months.

Sam Hillier

Sam Hillier is a reporter at Transacted, covering private equity and investment banking. He previously spent time as an investment professional focused on direct buyouts, as well as an earlier strategic advisory stint.

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