By Dana Mattioli
Health insurers Anthem Inc. and Cigna Corp. are in talks to
combine after Cigna last month spurned a $47.5 billion takeover
from Anthem, according to a person familiar with the matter.
Representatives of the companies met Friday and Tuesday to
discuss a potential tie-up, the person said. A deal could be
reached in coming weeks, the person said, though there is no
guarantee the latest round of talks will result in a tie-up.
Anthem has been trying to combine with Cigna for nearly a year,
but the two companies have struggled to agree on price and other
terms, including who would run the combined company. The effort
came to a head on a June Saturday when Anthem disclosed a series of
bids that month, including, most recently at $184 a share. Anthem
made the offers public to appeal to Cigna shareholders in the hopes
they would force the company to do a deal.
Cigna the next day publicly rejected that offer, calling it
"inadequate and not in the best interests of Cigna's shareholders."
Shares of Cigna, which is based in Bloomfield, Conn., closed
Wednesday at $162 each. The company's market capitalization is
around $42.6 billion. That is just below Anthem's market value of
$43.6 billion.
The talks come amid a flurry of discussions among the top five
health insurers aimed at striking deals that will enable them to be
more competitive in a health-care landscape dramatically altered by
the Affordable Care Act and other developments.
Humana Inc., the smallest of the group by revenue, is in talks
to possibly sell itself to Aetna Inc. Aetna has been stalked by
UnitedHealth Group Inc., the largest in the group, according to
people familiar with the matter. Cigna has also been examining a
potential purchase of Louisville, Ky.-based Humana, some of the
people said.
Anthem, based in Indianapolis and until last year known as
WellPoint, is a huge player in the individual and small-group
markets in the 14 states where it holds the rights to be the Blue
Cross and Blue Shield insurer. It also has a strong role among
national employers. Cigna, meantime, focuses closely on
self-insured commercial business and has a significant and growing
position overseas. Combining the two would create a big competitor
in the commercial health-insurance business, with strong positions
among individual, small-business and big-employer clients.
Among other things, Anthem and Cigna have clashed over the role
Cigna Chief Executive David Cordani would play in a combined
company. He wants to be CEO, if not immediately then after a period
of time, which Anthem refuses to guarantee.
At Friday's meeting, Anthem and Cigna discussed potential
synergies if the two companies were to combine, said one of the
people. Another issue discussed, the person said, was Anthem's role
as a Blue Cross and Blue Shield insurer, an issue Cigna also
highlighted in a letter to Anthem that it made public. The Blue
Cross and Blue Shield plans hold rights to use the Blue brand only
in particular areas, and they also agree to certain limits on their
non-Blue business.
It is unclear how Anthem would manage the legacy Cigna business
in states where another insurer is the local Blue. In its letter,
Anthem said it was "confident in its ability to obtain regulatory
approvals" and this "includes matters related to the Blue Cross
Blue Shield Association."
Cigna countered by highlighting potential complications arising
from Anthem's affiliation with the Blue system, including
litigation against it.
Write to Dana Mattioli at dana.mattioli@wsj.com
Access Investor Kit for Cigna Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1255091092
Subscribe to WSJ: http://online.wsj.com?mod=djnwires