Health insurer Humana Inc. is considering selling the company, a
move that could trigger a widely anticipated wave of consolidation
in the industry.
Humana has received indications of takeover interest and is
working with advisers at Goldman Sachs Group Inc., according to
people familiar with the matter. Aetna Inc. and Cigna Corp. are
among possible bidders for the company, some of the people
said.
It is possible there will be no deal for the company, which had
a market value Friday afternoon of about $27 billion.
Humana shares surged 5.1% to $187.48 before triggering a
single-stock circuit breaker.
Humana gets the bulk of its revenue from patients using
Medicare, the federal health-insurance regime for older Americans
that is often administered by private insurers. Like those of other
health insurers, Humana's shares have done well lately. They had
risen 42% over the past year as of Friday afternoon as the
Affordable Care Act, which requires individuals to have health
insurance, spurs demand.
A takeover of Humana, should one ensue, could lead to more
health-insurance consolidation, which has been relatively quiet
since a spate of tie-ups in 2011 and 2012 that included Aetna's
$5.7 billion purchase of Coventry Health Care Inc. and Cigna's
acquisition of HealthSpring Inc. for $3.7 billion. Both deals were
aimed at building scale in Medicare and Medicaid, which is geared
toward lower-income people.
Since then, the Affordable Care Act has created millions of
potential new customers by requiring individuals to have health
insurance. It also may set off a scramble for scale as companies
seek to better take advantage of the opportunity, analysts have
said.
"While impossible to predict timing, there is a consistent theme
of consolidation being openly discussed by a number of management
teams in the sector," J.P. Morgan analysts wrote in a recent
research note.
Humana posted pretax income of about $1.1 billion on revenue of
$34 billion last year. In the first quarter, its membership rose to
14.2 million customers and revenue jumped 18%, though its earnings
fell short of Wall Street expectations.
Humana last year hired a former Goldman Sachs banker as its
finance chief, a move widely seen as a signal that the company was
interested in pursuing deals.
In March, the company agreed to sell its Concentra Inc. unit,
which provides urgent care and physical-therapy services, to a
joint venture of Select Medical Holdings Corp. and private-equity
firm Welsh Carson Anderson Stowe for about $1.1 billion.
Anna Wilde Mathews contributed to this article.
Write to Liz Hoffman at liz.hoffman@wsj.com, Dana Mattioli at
dana.mattioli@wsj.com and Dana Cimilluca at
dana.cimilluca@wsj.com
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