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By Cara Lombardo
Carl Icahn's effort to find enough allies to block Cigna Corp.'s $54 billion proposed purchase of pharmacy-benefit manager Express Scripts Holding Co. just got a little harder.
Institutional Shareholder Services, one of two major proxy-advisory firms, is recommending shareholders of the health insurer and Express Scripts support the deal in a vote later this month, according to reports ISS clients received Friday that were viewed by The Wall Street Journal.
The news sent shares of Express Scripts up 3.8% to $84.90 Friday morning, as the odds the takeover will be completed appeared to improve. The stock still trades well below the price of about $96 a share in cash and stock Cigna in March agreed to pay for Express Scripts. Cigna shares were little changed.
While acknowledging Mr. Icahn's concern that the deal brings Cigna deeper into the rapidly evolving prescription-drug industry, walking away from it "could leave the company exposed to the legitimate long-term threat of rising healthcare costs," ISS said.
ISS concluded the deal's potential benefits, including increased scale and earnings, outweigh the concerns raised by Mr. Icahn.
The billionaire activist investor, who owns a 0.56% stake in Cigna, has been urging other shareholders to reject the deal, which he calls a "$60 billion folly." He doesn't think Cigna should spend that much money on Express Scripts, a pharmacy-benefit manager that could see its business model change under a Trump administration proposal to lower drug prices. He is also concerned about the changing pharmacy-industry landscape, especially as Amazon.com Inc. expands its presence.
Cigna has said Mr. Icahn doesn't understand the dynamics of health care and appears to be betting against the deal for a profit. Hedge fund Glenview Capital Management LLC, which has a $1.3 billion stake split between Cigna and Express Scripts, on Thursday publicly urged other Cigna shareholders to support the deal. Glenview said it will save the companies' customers "billions of incremental dollars annually."
Proxy-advisory firms' opinions hold significant sway with shareholders. The firms rarely recommend their clients, which include major institutional investors, vote against proposed mergers.
Both ISS and Glass Lewis recently recommended shareholders reject Rite Aid Corp.'s proposed merger with grocer Albertsons Cos. and the two companies called off the deal the evening before a scheduled shareholder vote.
Cigna and Express Scripts shareholders are set to vote on the deal Aug. 24. It requires signoff from a majority of shareholders of both companies.
Write to Cara Lombardo at firstname.lastname@example.org
(END) Dow Jones Newswires
August 10, 2018 12:00 ET (16:00 GMT)
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