In a statement, Aetna said it would pay about $230 a share for Humana, based on Aetna’s last closing price. The price represents a premium of 23 percent from Humana’s July closing. In May, WSJ reported that Humana was exploring a sale, when the shares of the company jumped by 18 percent to $210, whereas Aetna witnessed a 2.6 percent rise to $119.45. This $37 billion acquisition, following weeks of frenzied merger talks among the biggest health insurance companies, if completed would send Aetna on the path towards the top of the already booming Medicare business and put it on a scale three times its original size. Both the companies will hold a public conference call to discuss further details about the transaction on Monday.
Aetna and Cigna Corp. were among the top contenders for the takeover, considering Humana’s large share in the government’s Medicare business. Cigna and Anthem have resumed talks after Cigna earlier rejected a $47 billion acquisition offer from its rival Anthem, arguing the terms of the bid are inadequate and “woefully skewed in favor of Anthem shareholders.” UnitedHealth Group also approached Aetna earlier, regarding a takeover deal that could be valued at over $40 billion. Meanwhile, Medicaid insurer Centene Corp. has agreed to buy Los Angeles-based Health Net Inc. for $6.8 billion in a cash-and-stock deal that would increase its presence in California and other western states.
Medicare business is growing as more Americans reach the eligibility age for the health programs. And the deal comes just in time as the U.S. healthcare industry looks to consolidate and Aetna gets a bigger slice of the growing Medicare market. Humana still owns a major presence in Louisville, with around 3.2 million active Medicare Advantage members throughout the country. Humana recorded revenue of $48.5 billion in 2014 against the Aetna’s $58 billion. The deal, which is expected to close in the second half of 2016, would put the merged company at the forefront of the healthcare industry, ahead of the current leader UnitedHealth Group which holds a market cap over $115 billion. However, it is expected that the deal will face some hurdles considering it’s already facing scrutiny from antitrust regulators.