Market Overview

Everything You Need To Know About Aetna And Humana's Pending Merger

Everything You Need To Know About Aetna And Humana's Pending Merger

While questions and uncertainties persist regarding healthcare companies' prospects in the wake of an Affordable Care Act repeal, let's look ahead to what is in store for the impending merger between Aetna Inc (NYSE: AET) and Humana Inc (NYSE: HUM).

Merger Deal Announced

After a Wall Street Journal report disclosed Aetna's interest in Humana in June 2015, the companies confirmed an agreement on July 3, 2015. The deal, valuing Humana at $230 per share or $37 billion in total, was structured as a cash and stock deal.

Aetna had to defend the proposed deal to the Senate Judiciary subcommittee on antitrust concerns, reasoning that the combination would not thwart competition and would benefit consumers. However, there were concerns that the merger, if consummated, would reduce choices for consumers, given that the it seeks to combine the No. 2 and 3 health insurers, propelling it to the second position next only to UnitedHealth Group Inc (NYSE: UNH).

Shareholders, Most States Vet Deal

On October 20, 2015, shareholders of Aetna and Humana approved the proposed transaction. Mark Bertolini, the CEO of Aetna, defended the deal saying it would combine Aetna's leadership in the Medicare Advantage business with Aetna's strength in large commercial health insurance business.

The Office of Insurance Regulation in Florida gave its blessings to the proposed acquisitions in February 2016. This was considered a major step, as the companies serve a substantial number of Medicare Advantage beneficiaries in the state. However, Missouri opposed the deal in May 2016, citing its view that the deal is anti-competitive.

The merger received conditional approval in California in June 2016. Through a filing with the SEC, the companies pushed forward the deadline of the deal closure to December 31 from the original deadline of June 30. By July, the companies received the nod of 90 percent of the states.

DoJ Opposition

Then came the bombshell, the Justice Department filed lawsuits to block the merger in July 2016 and Justice John Bates was appointed to oversee the case. The Justice Department's argument was that the Aetna deal will harm seniors on Medicare Advantage, the government-subsidized insurance program for the elderly, and individuals who buy insurance on Obamacare exchanges in three states, namely Florida, Georgia and Missouri.

Along with this, the pending merger of Anthem Inc (NYSE: ANTM) and CIGNA Corporation (NYSE: CI) also came under scrutiny. The trail date was set for December 5, despite Aetna and Humana pushing for an October date.

Ruling Date Unknown

The trial ended on December 21 and parties in the case were scheduled to submit their findings to Bates on December 29. On December 30, closing arguments for the trail were presented. In the meantime, the companies extended the deadline for the deal closure for the second time, with the new deadline at February 15. Bates has not set a ruling date for the case, which makes the scenario fluid.

The deal now hangs in the balance. Can Aetna and Humana fight their way to a combination or the Antitrust obstacle lead to the unraveling of the deal along with the Cigna-Anthem combination, which is also being scrutinized?

Posted-In: Health InsuranceM&A News Health Care Politics Legal Trading Ideas General Best of Benzinga


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