Anthem Presses for Cigna Takeover at $54 Billion

(Los Angeles Times/TNS) -

Health-insurance giant Anthem Inc. reiterated the merits of its $54 billion offer for rival Cigna Corp. as shares of both companies rose Monday.

Joseph Swedish, CEO of Anthem, said in a conference call Monday that he’s hopeful negotiations with Cigna will be restarted and a deal can be wrapped up soon. Anthem said it’s not aware of other bidders at the moment.

“This is a strategic priority for us. We are determined to move quickly to complete this transaction,” Swedish said on a call with investors and analysts. “I’m hopeful of a good outcome.”

Investors reacted positively to the news of a potential merger, bidding up shares in both companies. Shares of Anthem, the nation’s second-largest health insurer, rose $5.98, or 3.6 percent, to $171.04. Cigna, the fifth-biggest insurer, saw its shares jump $7.34, or 4.7 percent, to $162.60.

Anthem took its negotiations with Cigna public Saturday after talks broke down over several issues, including the role of Cigna’s chief executive in a combined company.

Cigna responded Sunday, rejecting Anthem’s $184-a-share offer and blaming the company’s management for failing to address several outstanding issues. The cash-and-stock offer is worth $54 billion, including debt.

Together, the two companies would have $115 billion in annual revenue and serve 53 million members. That would make it the largest U.S. health insurer in terms of membership, ahead of industry leader UnitedHealth Group Inc.

UnitedHealth is already more diversified through its Optum health-services unit and recorded revenue of $130.5 billion last year.

On Monday, Anthem played up the growth opportunity with Cigna in Medicare Advantage, the privately run version of the government health program.

Anthem said a merger with Cigna would grant it access to fast-growing Medicare Advantage markets in Florida, Texas and Pennsylvania. Anthem already has a presence in California, New York and Ohio.

Those six states represent about 50 percent of Medicare Advantage enrollment, according to Anthem.

“We believe the combination of the two companies will allow us to more significantly grow into the government sector,” Swedish said.

Another concern raised by Cigna has been the difficulty Anthem might encounter by expanding into states where there’s already a Blue Cross Blue Shield insurer.

The Blue Cross Blue Shield Association has rules governing competition among its Blue-branded health plans and rights to certain areas.

Swedish expressed confidence that those issues could be resolved and won’t impede completion of a Cigna deal.

“We are confident in our ability to get regulatory approvals, including matters related to the Blue Cross Blue Shield Association,” Swedish said. “Our Blues colleagues are well aware of the movement to consolidation that’s necessary to strengthen the Blue brand. … We are living in a new day and new time.”

Swedish also addressed the disagreement over the CEO role in the combined company.

Anthem has proposed that Swedish serve as CEO for two years and Cigna’s leader, David Cordani, get a shot at the top job after that. Cigna has sought a bigger role for Cordani right away or guarantees of the CEO job.

Swedish stepped back from the war of words during the weekend and struck a conciliatory tone Monday.

“With respect to the role of the CEO, I should point out that has been a negotiating point in play for quite some time. I will simply say I have a lot of respect for the CEO of (Cigna) and the management team in its entirety,” Swedish said on the call.

Some employers and regulators have voiced concern that health-insurance consolidation could reduce competition and drive up premiums. Physician groups are also alarmed that mega-mergers will allow huge companies to dictate reimbursements and give them too much power in crafting narrower networks.

Swedish insisted Monday that customers will benefit from a merged company that can squeeze out costs and drive a better bargain with medical providers.

“The customer benefits from a clear improvement in cost efficiencies, choice of solutions and continued investment in simplifying the health-care experience,” he said.

Anthem is California’s largest for-profit health insurer and also sells Blue Cross policies in 13 other states.