By Dana Mattioli and Dana Cimilluca
Health insurer Cigna Corp. plans to buy Express Scripts Holding
Co. in a cash-and-stock deal worth $52 billion, excluding debt,
that the companies say will expand their health care offerings and
help them control costs.
Under the terms of the agreement, Express Scripts shareholders
will receive $48.75 in cash and 0.2434 shares in the combined
company for each Express Scripts share. The consideration amounts
to about $96.03 for each Express Scripts share, a 31% premium over
Express Scripts' Wednesday closing price of $73.42.
The deal has a total transaction value of $67 billion, which
includes Cigna's assumption of $15 billion of Express Scripts'
debt.
The Wall Street Journal reported late Wednesday night the two
companies were nearing a deal and could announce it as soon as
Thursday.
The combination is the latest in a flurry of proposed tie-ups in
the rapidly changing health-care-services business. St. Louis-based
Express Scripts is a pharmacy-benefit manager, or PBM. Such
companies serve as middlemen that help negotiate discounts with
drugmakers.
"When we think about Express Scripts, it has PBM capabilities,
but it has 27,000 individuals and a significant number of consumer
touchpoints around health and well being," Cigna CEO David Cordani
said in an interview Thursday morning. "It expands our service
portfolio beyond that of a PBM."
Cigna began exploring the tie-up seriously late last year, Mr.
Cordani said. One of the drivers for the deal is its ability to
broaden Cigna's offerings and reach. "Having the capabilities to
serve an individual whether they are healthy, healthy at risk,
chronic or acute is important, " he said.
Once the deal closes, Cigna shareholders will own about 64% of
the combined company, which will retain Cigna's name, and Express
Scripts shareholders will own about 36%.
Express Scripts share rose 18% premarket Thursday, while Cigna
shares are inactive.
Late last year, CVS Health Corp. signed a nearly $70 billion
deal to buy Aetna Inc. In 2015, Aetna agreed to buy fellow health
insurer Humana Inc. in a $37 billion deal that was later terminated
following regulatory scrutiny. That same year, Cigna agreed to
combine with Anthem Inc., a deal that was also blocked by
regulators.
Late last year, Anthem said it would launch its own PBM, dealing
a blow to Express Scripts, which is a partner of the health
insurer.
Anthem has been Express Scripts' biggest customer, representing
some $17 billion in annual revenue for the company. Last year,
Anthem said that it doesn't intend to renew its 10-year contract
with Express Scripts when it expires at the end of 2019.
The Affordable Care Act and other factors roiling the
health-care industry prompted the health insurers to attempt a
major consolidation wave in 2015.
After they were thwarted, a new round of deal making is under
way that stretches beyond just insurance. Besides this deal and
CVS-Aetna, Walgreens Boots Alliance Inc., the other top pharmacy
chain alongside CVS, had been pursuing a full takeover of
AmerisourceBergen Corp., a big drug distributor in which it already
owns a stake, The Wall Street Journal has reported, though those
talks appear to have cooled.
Meanwhile, grocer Albertsons Cos. recently agreed to buy what is
left of Rite Aid Corp., a smaller competitor of CVS and Walgreens,
after a big chunk of the drugstore chain was sold to Walgreens.
What it all adds up to is a furious round of consolidation as
health-care companies of all stripes seek to position themselves to
provide more cost-effective care and fend off heightened
competition from Amazon.com Inc. and others.
Amazon has taken steps to become a competitor in
health-care-equipment distribution, and fears are spreading that
its ambitions stretch further into the industry.
Express Scripts is the biggest administrator of
prescription-drug benefits in the U.S. It has marquee clients that
include the Department of Defense and Walmart Inc.
The company had for years prided itself on its independence,
even as its pharmacy-benefits competitors were gobbled up by other
players in the health-care industry, including insurer UnitedHealth
Group Inc. and CVS Health, a retail-pharmacy giant that is now
expanding into health insurance.
Last year, Express Scripts agreed to buy private
medical-benefits manager eviCore health care for $3.6 billion.
Industry watchers viewed the deal as a way for Express Scripts to
replace revenue following the expected loss of Anthem.
Bloomfield, Conn.-based Cigna is known for its focus on
administering coverage for large employers, as well as a burgeoning
overseas presence. With its 2012 acquisition of HealthSpring, Cigna
also bolstered its Medicare business.
The boards of Cigna and Express Scripts have both approved the
deal, which is expected to close by the end of the year, pending
shareholder and regulatory approvals.
Morgan Stanley is acting as sole adviser to Cigna. Centerview
Partners LLC and Lazard Frères & Co. LLC are advising Express
Scripts.
Cara Lombardo contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
March 08, 2018 07:14 ET (12:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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