NEW YORK: Health-insurance giant Aetna has agreed to acquire smaller rival Humana for $37 billion in a cash-and-stock deal, shaking up a sector that could see further consolidation.
Humana shareholders will receive $125 in cash and 0.8375 Aetna shares for each Humana share, a 22.6 percent premium to Thursday’s closing price on the New York Stock Exchange, the companies said in a joint statement early Friday.
UnitedHealth Group, a Dow component, is the leading company in the U.S. health insurance sector with a market capitalization of nearly $117.5 billion, while the company resulting from an Aetna-Humana tie-up would have a market cap of $74 billion based on their closing prices on Thursday.
Under the terms of the deal, current Aetna shareholders would have a 74 percent stake in the combined company and current Humana shareholders the remaining 26 percent.
The merged entity would have more than 33 million customers based on memberships as of March 31, 2015, and projected 2015 operating revenue of around $115 billion, 56 percent from government-sponsored programs, including Medicare and Medicaid, the companies said.
A Wall Street Journal article in May indicating negotiations were underway has sent Humana’s share price up by nearly 30 percent in recent weeks.
The agreement by Aetna and Humana could pave the way for other mergers to be consummated by the remaining companies in the United States’ health-insurance sector.
A merger, which is subject to regulatory and shareholder approval, would combine Humana’s surging Medicare business with Aetna’s diversified range of products, the statement said.
“The acquisition of Humana aligns two great companies and will significantly advance our strategy of more effectively serving members in a rapidly changing health care industry,” Aetna Chairman and CEO Mark Bertolini said.
Humana President and CEO Bruce Broussard said for his part that the transaction is an “outstanding outcome” for the company’s shareholders, “who will receive an immediate premium and the opportunity to participate in the growth potential of the combined organization.”
U.S. markets are closed on Friday for the Independence Day holiday.
