(CTN News) – Cigna, a U.S. health insurer, has decided to abandon its efforts to negotiate the acquisition of rival company Humana.
This decision was made after the two parties failed to reach an agreement on the price. Instead, Cigna has announced its plans to repurchase $10 billion worth of shares.
The potential merger would have resulted in a company valued at over $140 billion, but it would have faced intense scrutiny from antitrust regulators. This development comes six years after regulators blocked previous attempts to consolidate the health insurance sector in the United States.
Although the deal talks have ended for now, there is still a possibility of a future collaboration between the two companies.
In the meantime, Cigna intends to proceed with additional share repurchases totaling $11.3 billion. Cigna’s Chairman and CEO, David Cordani, stated that the company believes its shares are undervalued and that the repurchases will contribute to enhancing value and supporting high-quality care, improved affordability, and better health outcomes.
Cordani also mentioned that will consider strategic acquisitions and divestitures aligned with its overall strategy. Additionally, Cigna is exploring the potential sale of its Medicare Advantage business, which manages government health insurance for individuals aged 65 and older.
This move would mark a shift in expansion plans within the sector. Both Cigna and Humana have yet to respond to requests for comment on the deal talks.
The combined company would have had increased scale to compete with larger U.S. health insurance players like United Health and CVS Health.
Cigna and Humana, with market values of $77 billion and $59 billion respectively, currently have overlapping businesses focused on Medicare plans for older Americans. However, Humana’s Medicare business is larger and more profitable than Cigna’s.
To address concerns around antitrust challenges, Cigna has explored the sale of its Medicare Advantage operations. This divestment could potentially enhance the chances of a successful merger with Humana.
In the past, antitrust concerns have impacted similar deals, such as a failed attempt to acquire Anthem and Aetna’s abandoned deal to acquire Humana.
Despite the potential challenges, experts believe that a sale of the Medicare Advantage business could improve the prospects of the merger.