Anthem Inc. has made a buyout offer to rival health insurer Cigna Corp. for $175 per share, The Wall Street Journal reported Monday.
The Journal, citing an unnamed source, said the two companies have been in discussions for months and that in the last 10 days Anthem has made two takeover bids, both of which have been rebuffed. The last bid was for about $175 per share, the Journal’s source said.
That price would mean Indianapolis-based Anthem would pay $45 billion to acquire all of Cigna’s outstanding shares, making it the largest health insurance merger in U.S. history.
Shares of Hartford, Connecticut-based Cigna shot up as much as 19 percent Monday as news of the report spread, and trading was halted for a time. Cigna shares closed Friday at $137.31, meaning the Anthem offer would pay shareholders a 27-percent premium.
In an e-mail, Anthem spokeswoman Kristin Binns said the company does not comment on rumors or speculation.
The Wall Street Journal report comes less than a month after Anthem Chief Financial Officer Wayne DeVeydt told investors that Anthem was mulling a large-scale deal that would be “transformative.”
"I like the pricing environment a lot and we have a lot of capacity to work with to do a cash transaction of meaningful size—and it would be transformative," DeVeydt said on May 19, according to Reuters. He added, “We believe this is an industry that is going to continue to consolidate. We plan to be prudent in our M&A.”
At least one analyst speculated that Anthem or Hartford-based Aetna Inc. would buy Cigna. But most speculation had focused on Louisville-based Humana Inc. after the Wall Street Journal and other news sources reported May 29 that it had hired an investment bank to help it explore a possible sale.
“Strategically the transaction would improve the competitive position of both concerns,” Chris Rigg, an analyst at Susquehanna Financial Group, said in a research note, according to Bloomberg News.
Amid speculation of consolidation in the industry, analysts have been working to figure out how the deal frenzy will shake out. If Anthem targets Cigna, Aetna is likely to pursue Humana, Rigg said.
“Alternatively, if Cigna really doesn’t want to sell, then the obvious defense is to buy Humana at any cost,” he said. “Crazy times.”
Shares of Anthem’s stock rose as much as 4 percent in morning trading, to $167.20 each.
Anthem was built by acquisition, as the Indiana Blue Cross and Blue Shield plan scooped up peer Blues plans in several other states. Anthem became the nation’s second-largest health insurer in 2005 by swallowing up an even-larger competitor, California-based WellPoint Health Networks. But since then, Anthem has done only smaller deals, with the largest being its $4.5 billion acquisition of Virginia-based Amerigroup Inc.
Anthem had $73.9 billion in revenue last year, roughly twice as much as Cigna, which had 2014 revenue of $34.9 billion.