Aetna Inc. to Acquire Humana Inc. for $37.0 Billion

Aetna Inc. to Buy Humana IncThe biggest consolidation is happening in the health insurance industry: Aetna Inc. (NYSE/AET) announced that it agreed to buy Humana Inc. (NYSE/HUM) for $37.0 billion. (Source: Aetna, July 3, 2015.)”

Aetna will buy all outstanding shares of Humana with both cash and stock valued at $37.0 billion. Humana’s shareholders will receive $125.00 in cash and 0.8375 shares of Aetna for each Humana share. This values Humana’s shares at approximately $230.00 per share, a 23% premium over Humana’s closing price on July 2nd.

After the transaction, Aetna’s shareholders would own around 74% of the combined company while Humana’s shareholders would own around 26%. The deal is expected to close in the second half of 2016.

Aetna will use cash on hand, but also need financing for the cash part of the transaction. The acquirer plans to issue approximately $16.0 billion of new loans, debt, and commercial paper.


The deal would combine Aetna’s commercial capabilities with Humana’s fast-growing Medicare Advantage business. The combined company would be the second-largest managed care company in the U.S., only behind UnitedHealth Group Incorporated (NYSE/UNH).

The combined company is projected to generate $115 billion in revenue in 2015. For 2016, Aetna expects the transaction to be neutral to the company’s earnings-per-share (EPS). In 2017, the transaction is expected to generate mid single-digit growth in EPS, and accelerate to low double-digit growth in 2018.

“The acquisition of Humana aligns two great companies and will significantly advance our strategy of more effectively serving members in a rapidly changing healthcare industry,” said Aetna Chairman and CEO Mark T. Bertolini. “This combination will allow us to continue to invest in excellent service for our members and strengthen our partnerships with providers to deliver high quality care at an affordable price.

As the stock market is closed for the Fourth of July weekend, the official announcement is yet to be digested in the companies’ share prices.