According to sources familiar with the situation, US health insurer Cigna abandoned plans to merge Humana. This would have created an insurance giant worth $140bn.
The merger would have been largest deal of the year. Cigna’s decision was based on disagreements over financial arrangements and regulatory concerns, as well as falling stock prices after reports of a potential tie-up.
According to a person with knowledge of the situation, shareholders generally want their CEOs executing transformative deals. However, this is not possible in today’s environment. They said the risk of a deal being blocked or left in limbo was too high.
Cigna has prioritized stock buybacks over merger talks. On Sunday, the insurer announced that it would increase stock buybacks from $10bn. The Wall Street Journal was the first to report that Cigna’s plans to merge Humana were over.
Cigna or Humana didn’t immediately respond to comments. Cigna’s chief executive David Cordani stated that the company was “financially minded” and would “consider bolt-on acquisitions” aligned to its strategy in a recent statement about its share repurchase program.
Cordani stated that “we believe Cigna shares are undervalued significantly and that repurchases would be a good way to deploy capital in a manner which enhances value.”
In recent years, the US healthcare industry has seen a consolidation of its operations due to a growing need to cut costs. This is despite heightened regulatory pressures. CVS Health paid nearly $20bn earlier this year to acquire the home health provider Signify Health, and the primary care network provider Oak Street Health.
According to a global survey by Jefferies, 70% of healthcare companies anticipate M&A activity to increase in healthcare in 2024 following two relatively quiet years. PwC’s mid-year report found that US health services deal volumes were 4 percent lower than they were in 2022.
Humana and Cigna combined made about $263bn. Humana and Cigna combined made $263bn.
Cigna and Humana both had prior deals blocked by federal court. Humana and Aetna canceled their merger plans in 2017 after a federal court ruled that it was anti-competitive. Cigna & Anthem ended their talks after a similar ruling by the federal government.