Analyst Sees Humana Deal At $225-$235/Share

Humana Inc HUM's third consecutive quarterly earnings miss in April made it vulnerable as a takeover target, an analyst said Monday.

Investors expect the company will be acquired for between $225 and $235 a share, according to UBS's A.J. Rice, who said a deal will require nine to 12 months to clear regulatory hurdles.

Humana changed hands recently at $214.92, up $0.13.

In late April and last month, Humana shares came under pressure following its first quarter earnings report as investors worried that the company would reduce its guidance.

A transition to a new, risk adjustment model used by government Medicare administrators, will hurt "certain of our markets," Humana's Chief Executive Bruce Broussard told analysts in April.

"Humana hasn't appeared to be a willing seller until recently," Rice said. "Now they seem ready to consider strategic options."

Unconfirmed reports suggest that both Aetna Inc AET and Cigna Corporation CI have approached Humana with interest in bidding.

The absence of Anthem Inc ANTM from reports "may mean the price tag has gotten too rich for them," Rice said, noting that Anthem executives have said they're interested in acquisitions that strengthen the company's Medicare business.

For Cigna, a Humana acquisition would be "essentially a merger of equals," Rice said, "leaving us skeptical that Cigna would be the eventual buyer."

Aetna "has been the most vocal proponent" of consolidation in the managed care sector, according to Rice, who said Aetna "wants to add scale to its government business."