Cigna Is Buying Express Scripts in a $54 Billion Health Industry Deal

Cigna Is Buying Express Scripts in a $54 Billion Health Industry Deal

Health insurance giant Cigna announced Tuesday that it is buying Missouri-based pharmacy benefits manager Express Scripts for $67 billion, a deal that could give Cigna more control over drug prices.

United States health insurer Cigna has agreed to buy pharmacy benefits manager Express Scripts in a deal worth US$52 billion, the latest mega transaction in the healthcare-related business in the country.

The transaction, which has been approved by the board of directors of both companies, offers Express Scripts shareholders $48.75 in cash and 0.24 shares of stock of the combined company for each of their shares. Tim Wentworth, president and CEO of Express Scripts, would become president of Cigna, the companies said.

Scott Sperling, co-president of the private equity firm THL Partners, told CNBC said the Cigna-Express Scripts deal makes sense after Cigna's deal with Anthem was blocked by antitrust regulators. Nationally recognized Johnson Fistel is investigating whether the proposed deal represents adequate consideration, especially given the Company's projected earnings growth and one Wall Street analyst has a $101.00 price target on the stock. But don't be surprised if more health care companies succumb to the urge to merge as well, even as they wait for signs from Washington.

Express Scripts Holding Company (NASDAQ:ESRX) closed its last session at $73.42. The Express Scripts unit will remain based in St. Louis County but the combined company's headquarters will be in Bloomfield, Conn., where Cigna is based. Swedbank purchased a new stake in shares of Express Scripts in the 4th quarter valued at approximately $111,016,000.

Cigna says the acquisition will expand consumer choice, offering a full suite of medical, behavioral, specialty pharmacy and other health services across a variety of channels.

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Cigna intends to fund the cash portion of the transaction through a combination of cash on hand, assumed Express Scripts debt and new debt issuance and Cigna has obtained fully committed debt financing from Morgan Stanley Senior Funding, Inc and The Bank of Tokyo-Mitsubishi UFJ Ltd.

David Cordani, Cigna's CEO, believes the merger will improve quality and increase affordability for consumers.

Last year, Anthem's planned takeover of Cigna was blocked on concerns it would undermine competition, ending an nearly two-year battle to combine two of the biggest health insurers in the U.S.

The transaction is not subject to any financing conditions. It called off a $54 billion merger with Anthem a year ago after a federal judge blocked the deal on antitrust grounds.

Cigna served 15.9 million customers in 2017 while reporting 2017 revenue of $41.6 billion and profit of $2.2 billion. Mizuho maintained the shares of ESRX in report on Wednesday, January 13 with "Buy" rating.

The transaction is expected to close by December 31. Until then, the two companies will continue to operate independently. LLC is acting as sole financial advisor to Cigna while Wachtell, Lipton, Rosen and Katz is serving as legal counsel and Paul, Weiss, Rifkind, Wharton & Garrison LLP as regulatory counsel to Cigna.

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