Anthem Inc. increased its takeover offer for Cigna on Saturday to $184 per share in cash and stock – a deal worth about $47 billion.
Indianapolis-based health insurer Anthem said that the bid was its fourth for Cigna in June, adding that previous offers were rejected over Cigna CEO David Cordani’s role in the merged company.
A source familiar with the matter said that Anthem made the cash-and-stock offer public to increase pressure on Cigna through its shareholders.
Anthem CEO, Joseph Swedish, said in a letter that the offers were rejected because of Anthem’s refusal to guarantee that the position of CEO would eventually go to Mr Cordani.
In addition, the letter revealed that Cigna refused to sign a two-week standstill agreement with Anthem.
If Anthem and Cigna were to combine they would have 53 million customers in commercial, government, consumer and other health insurance plans.
According to Anthem, the acquisition would boost earnings by over 10 percent in the first year, and increase to 20 percent in the second year.
The takeover attempt comes as Cigna and Aetna Inc are said to be making offers to acquire Humana.
Consolidation in the US health insurance industry
The bid Anthem made to acquire Cigna on Saturday represents the latest move in an industry set to become more consolidated.
Large health insurance companies in the US are on the hunt to acquire smaller rivals to increase membership in government-paid healthcare plans and employer-based insurance.
The sector is under pressure to cut costs and consolidation would help address that problem.
The bigger a health insurance company is the better it can negotiate prices and improve its network of doctors.
Another term for takeover is acquisition. The company aiming to do the purchasing is called the bidder or acquirer, while the one being targeted is known simply known as the target. In this article, Anthem is the bidder and Cigna is the target. When two companies ‘get married’ (they are equals), we call it a merger.