That was mercifully fast. After all the speculation and rumors [TTA 2 Dec], Cigna and Humana called off their talks on 10 December after not coming anywhere near terms on the financials. According to the Wall Street Journal, it was also evident that shareholders disliked it nearly immediately by driving down the share prices of both companies by 10%.
Their sources indicated that it would be a share and cash deal by Cigna for Humana, which added to shareholder displeasure. Cigna will be instead buying back up to $10 billion in stock to drive up their valuation. Reportedly, the repurchasing of least $5 billion of stock will take place between now and H1 2024. Cigna will also concentrate on smaller ‘bolt-on’ acquisitions and the sale of its Medicare Advantage business as previously announced. In the past five days, Cigna shares plumped by nearly $50 and Humana’s by about $10.
The WSJ‘s sources stated that Cigna continues to believe in a combination with Humana, something that the two companies have danced around for years, dating back even before the proposed payer megamergers of 2015 which saw Humana’s acquisition by Aetna (and Cigna’s by Anthem, now Elevance) disapproved both by states and at the Federal antitrust level. The two would, at least on paper, be a good fit, with Cigna’s strength in commercial plans plus Evernorth’s services added to Humana’s in Medicare Advantage, Medicaid, and home health services under CenterWell. It would have created a strong rival to UnitedHealth Group and CVS Health at $300 billion in revenue. What may have proved to be the antitrust stumbling block were their respective strengths in pharmacy benefit management (PBM) though with different focuses.
Even more than the increasingly hostile Federal antitrust environment between DOJ and FTC, it also points to the paucity of funding for mergers and acquisitions–M&A down 14% so far this year to about $1.2 trillion according to Dealogic.
In about three years, healthcare funding has gone from money thrown by VC and PE investors at what we recognize now as shaky propositions (Cerebral, Babylon Health, Olive AI, Pear) to no interest (or funds available) in what would be quality matchups. The pendulum swings–and swings back. We hope. Healthcare Dive