Aetna is almost close to an agreement to buy its rival Humana for about $34 billion. On Thursday, people familiar with the matter briefed that this is the first in a series of mergers among the country’s big health insurer.
Under the agreement, Aetna would pay almost $230 a share in stock or cash. That is nearly 29 per cent higher than where Humana's shares were trading before the emergence of news reports that the firm was considering selling itself. A deal between Aetna and Humana could be fast approaching; however, people briefing on the discussions said that a formal accord had yet to be signed, and that the discussions could in any case fall apart.
A number of the nation's big health insurers have been rushing toward another round of consolidation, looking to increase more prominent scale and wring out expenses from their operations. Such belt-tightening is progressively imperative in light of the fact that a large number of the new customers, which insurers are seeking for, and are more sensitive to the cost of health coverage. In the meantime, getting bigger would give insurers more clout to negotiate expenses with health systems.
That push for mergers got a jolt a week ago, after the Supreme Court upheld a key element of the Obama administration’s health care overhaul that has deployed a boost to the insurance industry. By ruling that the US government could keep on funding health insurance for average income Americans, the court basically ensured huge new markets for insurers.
A large portion of the new customers would be coming in through Medicare; a particular strength for Humana — and one of the key attractions for a pack of suitors that also included Anthem, and Cigna. Huge numbers of those invested parties have relatively minor Medicare Advantage operations.
Meantime, Humana has been viewed as prepared for a potential agreement. The firm, situated in Louisville, Ky., struggled to meet profit expectations for a significant part of the last year; however, both its membership rolled and its revenue ascended in the first quarter of this current year.
Yet, Humana risked to let out of the flurry of mulled over mergers brewing in the industry domain. Aetna has received a preliminary takeover approach from UnitedHealth, the biggest of the insurers, while Anthem is seeking after a merger with Cigna.
Government regulators are considered as unrealistic to permit those insurers to seek after mergers, implying that some potential transactions would be blocked. Antitrust authorities at the Justice Department and the Federal Trade Commission have flaunted their willingness to clip down on deal frenzies in recent years, including among food service providers and telecommunications companies.
Health insurance analysts have stated that UnitedHealth would confront a tough battle to buy its small rival - Humana, given that both firms have significant Medicare businesses.
That implied Humana needed to move quickly to bolt up its own merger alliance or be left on its own, opposing against much bigger adversaries.
Since the last two weeks, Aetna rose as Humana's almost likely suitor. Yet the discussions between the two firms have demonstrated an event with negotiations taking incessant pauses, before speeding toward the finish line on Thursday.