Anthem, Inc. (NYSE/ANTM) has made an approach to takeover Cigna Corp. (NYSE/CI) as consolidation in the health insurance industry intensifies.
On Monday, June 15, The Wall Street Journal reported that Anthem made a bid to purchase the rival insurer Cigna. Anthem is rumored to have made two takeover bids, the most recent one at about $175.00 a share. Both, however, were rejected. Cigna shares soared on the news, closing the trading session up 11.74% to $153.43 per share. (Source: The Wall Street Journal, June 15, 2015.)
The potential deal is just another example of the wave of consolidations hitting the health insurance industry. Since the Affordable Care Act came into effect in 2013, millions of potential new customers, as American citizens, have been required to have health insurance. As a result, the industry is facing intense pressure to cut costs.
Last month, Humana Inc. (NYSE/HUM) received indications of takeover interest and is working with advisors at The Goldman Sachs Group, Inc. (NYSE/GS). UnitedHealth Group Incorporated (NYSE/UNH), the biggest health insurer in the U.S., is also rumored to be considering a pursuit of takeover deals with Cigna or Aetna Inc. (NYSE/AET), as The Wall Street Journal reported earlier this week, citing people familiar with the matter.
For investors, a merger of Anthem and Cigna would bring together the two big players in the industry. Health insurance companies in the U.S. have been trading at nearly all-time highs. Going forward, analysts expect the sector could see more mergers and acquisitions as competition intensifies.