Cigna Ends Acquisition Talks with Humana, Announces $10B Share Repurchase Plan

What You Should Know:

– Health insurer Cigna has called off its attempt to acquire rival Humana after failing to reach an agreement on price, according to sources familiar with the matter, CNBC first reports.

– The talks, which were revealed in November 2023, would have created a combined company exceeding $140B in value, but faced significant antitrust scrutiny.

– The deal’s failure comes six years after similar mega-mergers in the health insurance industry were blocked by regulators. This latest development highlights the ongoing challenges of consolidation in the sector.

Cigna’s Repurchase Plan

Cigna, however, announced plans to repurchase an additional $10B of its own shares, bringing the total repurchase program to $11.3B. This move indicates a focus on returning value to shareholders through direct investment in the company.

Cigna CEO David Cordani stated that the share repurchases reflect their belief in the company’s undervaluation and commitment to delivering high-quality care, affordability, and improved health outcomes. He also mentioned considering bolt-on acquisitions and value-enhancing divestitures to further enhance shareholder value.

Additionally, sources confirmed that Cigna is exploring the potential sale of its Medicare Advantage business, marking a potential shift in its strategy within the sector. This divestment could potentially improve the chances of a future combination with Humana by addressing potential antitrust concerns.

Neither company has officially commented on the deal talks, which were initially reported by The Wall Street Journal.

Antitrust Concerns

Analysts believe the failed merger would have provided the combined entity with greater scale to compete against larger players like UnitedHealth and CVS Health. However, the significant overlap in their Medicare businesses, particularly Humana’s dominant position, raised antitrust concerns.

Furthermore, the shadow of past antitrust challenges in the industry loomed large. In 2017, similar mega-mergers involving Anthem (Elevance Health) and Cigna, as well as Aetna and Humana, were blocked by U.S. courts due to antitrust concerns.

Healthcare economist Craig Garthwaite expects antitrust authorities to challenge any future merger attempt between Cigna and Humana. However, he believes that a sale of Cigna’s Medicare Advantage business could improve the deal’s prospects by mitigating antitrust concerns.

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