Health insurer Anthem, Inc. (NYSE/ANTM) went public this weekend in its bid to take over Cigna Corporation (NYSE/CI). To Anthem’s dismay, the smaller rival just told them to buzz off.
On Saturday, June 20th, Anthem unveiled a $47.0 billion takeover bid for Cigna. But in a harshly worded letter published over the weekend, Cigna’s management team said they were “deeply disappointed” with Anthem’s recent proposal and that the offer was not in the best interest of the shareholders. (Source: Cigna Press Release, June 21, 2015.)
“Anthem’s ‘lack of growth strategies,’ complications related to its membership of Blue Cross Blue Shield Association and its ‘massive’ data breach in February were part reasons why the company was rejecting Anthem’s stock and cash offer,” Cigna Chairman Isaiah Harris, Jr. and Chief Executive David Cordani wrote in a letter to Anthem’s board.
Related Article: Anthem Talks to Cigna About Possible Takeover
Anthem’s offer for smaller rival Cigna is part of 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 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).
The drama between Anthem and Cigna is likely not over yet, however. In pre-market trading on Monday, June 22nd, Cigna’s shares soared nearly nine percent higher to $169.00 in pre-market trading. The move indicates traders are expecting Anthem to make a higher bid in the near future.
For investors, a merger between these two companies could bring together the two big players in the industry. Investors continue to be optimistic as health insurance companies in the U.S. have been trading at nearly all-time highs. Going forward, analysts expect more mergers within the health insurer industry.