Aetna acquiring Humana for $35 billion

Aetna is acquiring rival health insurer Humana for $35 billion.

The US health insurance giant announced on Friday that it agreed to takeover its smaller rival in a cash-and-stock deal.

The deal represents further consolidation in the US health insurance sector, which is adjusting to the federal healthcare overhaul.

The acquisition would combine two of America’s largest health insurers. Aetna is lining up a $16.2 billion bridge loan to fund the takeover.

aetna

US health insurance companies are looking for ways to cut costs and expand in government and individual markets.

The merged company would have more leverage when it comes to negotiating contracts, operate more efficiently, and be in a better position to diversify products and cover more territory.

The acquisition will give Aetna more presence in the Medicare Advantage business, the federally funded Medicaid program and Tricare coverage.

Humana has almost 3.2 million people enrolled in Medicare Advantage plans – a figure second only to UnitedHealth Group Inc.

Mark T. Bertolini, Aetna’s chairman and chief executive, said in a news release that the acquisition “will significantly advance our strategy of more effectively serving members in a rapidly changing health care industry,”

In total the takeover offer is a combination of cash and stock worth about $230 per share. Around 74% of the combined company would be owned by Aetna shareholders, while Humana shareholders would own the remaining 26 percent.




The deal still requires shareholder and regulatory approval. It is expected to close in the second half of next year.

Aetna’s leader, Mark Bertolini, would serve as chairman and chief executive of the merged company.

Citigroup, Lazard and Davis Polk & Wardwell advised Aetna.

Goldman Sachs and Fried, Frank, Harris, Shriver & Jacobson advised Humana.


Video – What is takeover?

A takeover occurs when one company acquires another; that is why we also call it an acquisition. When they are both the same size and get together to make one company, we call it a merger.