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All Eyes on Cigna (CI)/Anthem (ANTM) With Aetna (AET)/Humana (HUM) Deal in the Books

July 6, 2015 8:57 AM EDT
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With Aetna (NYSE: AET) agreeing to acquire Humana Inc. (NYSE: HUM) over the long holiday weekend for $230/share in cash and stock, the pressure is now on Cigna Corp. (NYSE: CI) and Anthem (NYSE: ANTM) to get a deal done.

In late June, Anthem submitted a non-binding proposal to acquire Cigna for $184 per share in cash and stock. Cigna rejected the offer as "inadequate and not in the best interests of Cigna’s shareholders."

Analyst and investors are now stepping up their rhetoric on an ANTM/CI deal with the AET/HUM merger announced.

"We continue to believe Anthem and Cigna will reach an agreement, though potentially at a higher share price with different governance terms," Wedbush analyst Sarah James said in a note to clients this morning. "We estimate the final sale price could be in the $186-190 range and view the announcement of the dual board approved HUM/AET deal as adding pressure on ANTM/CI to reach an agreement."

Leerink Partners Ana Gupte said she sees the AET-HUM transaction as paving the way for an ANTM-CI combination. "We believe news reports of renewed negotiations are likely to result in ANTM increasing offer price along with some governance concessions for CI," Gupte said. "This deal would be highly accretive at 25+% in 2018E Year 2 after close with a pro forma EPS estimated at $17-18 per share. ANTM management has expressed confidence in being able to address the Blue Cross Blue Shield threshold minimums with a 2-year period for compliance."



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