Cigna Rejects Anthem’s ‘Woefully Skewed’ $53.8B Proposal
By - The largest ever proposed health insurance merger perhaps falls short. Anthem, Inc announced its submission this week of a highly conditional, non-binding $53.8 billion proposal, including debt, to acquire Cigna Corporation for $184 per share in cash and stock to promote advanced healthcare delivery. This combined company, an “industry leader,” would serve nearly 53 million medical members, generating over $115 billion in annual revenues, according to both companies’ recent outlook publicity reports. The offer is part of a general movement of potential deals within the health insurance realm where the negotiation power regarding prices is a key facet for substantial industry-wide moving and shaking.
Cigna cites numerous unaddressed concerns on behalf of Anthem within its general response to the public proposal. Cigna claims the proposal is “woefully skewed” and “inadequate” in nature, misaligned with shareholders’ best interests.
Anthem explained its frustration with the aforementioned proposal and urged Cigna’s Board of Directors to abandon unreasonable governance demands in relation to the sizable premium being offered and continue negotiations to establish a mutually agreed upon transaction. According to a June 20 letter delivered to Cigna by Anthem’s President and CEO, Joseph R. Sweden, the combination of complementary strengths will foster value across a variety of markers and will provide “the broadest suite of health engagement, benefits and specialty solutions for employers of all sizes, combined with significant capabilities in the growing Seniors, Medicaid, International and Individual Markets.”
“This combination is the absolute best strategy for both organizations to maximize the potential and lead the transformation of the health care industry,” Sweden maintains. “Together our companies would rapidly build on each other’s complementary strengths to create a diversified platform that could better capitalize on new opportunities and meaningfully deliver innovative, quality solutions to all of our stakeholders.” The deal is alleged to stimulate synergies of almost $2 billion within 2 years of settlement through the generation of operating synergies and both general and administrative expense savings.
In a June 21 letter addressed to Anthem’s Board of Directors from Isaiah Harris, Jr, Former President and CEO of AT&T Advertising & Publishing, and David M. Cordani, Cigna’s President, CEO, and Director, the notion of deep disappointment and a concern that Anthem’s stock and cash offer is simply inadequate is detailed.
“You have publicly stated that a transaction, on your terms, would provide greater than 20% accretion to your adjusted earnings per share within two years of closing. Your proposed allocation of shareholder value is woefully skewed in favor of Anthem shareholders,” Harris and Cordani state. “Your June 20 proposal would not allow the combined company to take advantage of the value creation benefits that would otherwise exist in a true merger, with both management teams working to achieve the full potential of a combination,” they add.
Harris and Cordani additionally reference Anthem’s earlier data breeches, as reported by HealthItSecurity.com, which affected nearly 19 million non-customers and compromised the personal information of 80 million people.
