Anthem Inc., undeterred by Cigna’s rejection of its takeover bid, took its case to financial analysts Monday, expressing confidence that it could sign a merger deal “quickly.”
“We just felt the process was not developing in a way … that best represented the interests of the shareholders,” Joseph R. Swedish, CEO and president of Anthem Inc. of Indianapolis, told financial analysts during a conference call Monday.
Swedish said that Anthem went public with details of its offer to appeal to shareholders, “so that, if necessary, they would make the decision on behalf of the two companies.”
Anthem is moving forward despite Cigna’s objections in a move that’s known in business as a hostile takeover.
“We are determined to move quickly to complete this transaction,” Swedish said. When asked about Anthem’s next steps, Swedish said he was hopeful that the company will “re-engage,” presumably in talks with Cigna, resulting in a “good outcome.”
Ana Gupte, a financial analyst with Leerink Partners, wrote in a note to investors Monday, “We expect that while [Cigna] may negotiate for a modestly higher price, that this deal will be consummated.” Gupte added that she expects that the largest five health insurers will merge into three companies.
Typically, business executives keep quiet about the details of a merger or acquisition until the buyer and seller reach an agreement. Anthem, the nation’s second-largest health insurer, issued a media release on Saturday with details of its offer to buy Cigna.
Anthem has offered $184 per share — of which 68.6 percent would be paid in cash and the other 31.4 percent would be funded through Anthem stock.
On Sunday, Cigna publicly criticized the offer as “inadequate and not in the best interests of Cigna’s shareholders,” and said the board of directors unanimously rejected it. CEO David M. Cordani and board Chairman Isaiah Harris Jr. wrote a letter, dated June 21, to Anthem’s board detailing their objections.
In Sunday’s letter, Cigna officials did not rule out an acquisition.
“A combination involving Anthem and Cigna under the right circumstances has the potential to bring together our complementary strengths in a manner that would provide substantial benefits to both consumers of healthcare services and healthcare professionals, while delivering immediate and sustainable economic returns to shareholders,” Cordani and Harris wrote.
On Monday, Cigna declined to comment on the Anthem CEO’s remarks in his conference call.
If the two were to merge, it would create a health insurance giant with 53.2 million customers across all lines of business, including government-funded programs such as Medicaid and Medicare, commercial health insurance sold to employers, health plans sold to individuals, and international business. The deal would launch Anthem ahead of the nation’s largest health insurer, UnitedHealthcare, which has about 45.8 million customers.
Cigna appeals to Anthem because of its strong National Accounts platform, which is insurance offered to large employers; its stock of coverage for mid-sized businesses and its specialty programs, such as dental, vision and behavioral health, according to an Anthem presentation. Cigna’s appeal also includes its wellness programs, Medicare business and its international business.
Anthem expects that it would increase its annual revenue from $78.5 billion to $115 billion if it acquired Cigna.
Anthem said the company and its advisers were “highly confident in the ability to finance and consummate the proposed transaction.”
What remains unclear is how a deal would affect employment at Cigna Corp., which has added more than 200 jobs in the state since moving its headquarters in 2011 to Bloomfield from Philadelphia. Cigna now employs about 4,200 in Connecticut.
In July 2011, Cigna agreed to add 200 jobs and spend $100 million in Connecticut in exchange for $47 million in benefits from the state. Cigna was the first company to take advantage of the state’s First Five program, which offers tax incentives to companies that add at least 200 employees.
This is one of many proposed acquisitions in the health insurance industry as the top five companies jockey for market share. Over the weekend, Aetna made an offer to buy Humana, according to The Wall Street Journal. Last week, UnitedHealth Group of Minnetonka, Minn., made an offer to buy Aetna, The Wall Street Journal reported, citing unnamed sources.
Date: June 22, 2015