Humana, WellCare dive after Cigna buys Express Scripts

Humana, WellCare fall Cigna agrees to buy Express Scripts for $67B

Cigna to acquire Express Scripts for $67B. Stockwinners
Cigna to acquire Express Scripts for $67B. 

Shares of Humana (HUM) and WellCare (WCG) are in the red after Cigna (CI) announced that it has agreed to acquire Express Scripts (ESRX) in a cash and stock transaction valued at about $67B.

Commenting on the news, Piper Jaffray argued that the deal makes it less likely in the near-term that Cigna would buy a Medicaid or Medicare Advantage plan.

EXPRESS SCRIPTS ACQUISITION:

Cigna and Express Scripts announced that they have entered into a definitive agreement whereby Cigna will acquire Express Scripts in a cash and stock transaction valued at approximately $67B, including Cigna’s assumption of approximately $15B in Express Scripts debt. The merger consideration will consist of $48.75 in cash and 0.2434 shares of stock of the combined company per Express Scripts share.

Upon closing of the transaction, Cigna shareholders will own approximately 64% of the combined company and Express Scripts shareholders will own approximately 36%. Upon closing, the combined company will be led by David Cordani as President and CEO. Tim Wentworth will assume the role of President, Express Scripts.

igna to acquire Express Scripts for $67B. Stockwinners
Express Scripts sold for $67B

MEDICAID, MA DEAL LESS LIKELY

Piper Jaffray analyst Sarah #James told investors that she does not foresee any issues with approval, even though a Cigna/Express Scripts combination would increase annual script volume to 848M, making it the third-largest pharmacy benefit manager.

However, the analyst noted that she does not expect Cigna’s script volume to transition over to a combined company until 2023 when its contract with UnitedHealth’s (UNH) OptumRx ends.

Nonetheless, James argued the deal makes it less likely that Cigna will buy a Medicaid or Medicare Advantage plan near-term, consistent with management’s softened language around using M&A to win long-term services and supports, or LTSS, contracts.

Two names that have been seen as potential targets in the sector are Humana and WellCare.

 Humana, WellCare dip after Cigna agrees to buy Express Scripts. Stockwinners
Humana, WellCare dip after Cigna buys Express Scripts 

WHAT’S NOTABLE:

Some Wall Street analysts had previously seen Cigna as a potential takeover target for Amazon (AMZN) as they speculated what the next step would be for the e-commerce giant, especially following its health care venture with Berkshire Hathaway (BRK.A., BRK.B) and JPMorgan (JPM).

 Humana, WellCare dip after Cigna agrees to buy Express Scripts. Stockwinners
Humana, WellCare dip after Cigna agrees to buy Express Scripts

PRICE ACTION

In Thursday’s trading, shares of Cigna have plunged about 9.5% to $175.90, while Express Script’s stock has gained over 11% to $81.63.

Shares of Humana are fractionally down to $272.27, and WellCare’s stock has slipped almost 1% to $193.03.


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This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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