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US health insurance giant Aetna will buy rival Humana for $37 billion, a statement issued today by both companies said, creating a group with estimated annual sales of $115 billion.
Aetna, the second-largest US health insurance player in market capitalisation terms, said it will pay $230per Humana share in a cash and stock deal to create a new entity with around 33 million customers.
According to agreements approved by both boards, the transaction will leave Aetna shareholders owning around 74 per cent of the new group, and investors with Humana stock with 26 per cent.
The Aetna offer was considerably higher than Humana's $187.50 share price at Wall Street's close yesterday.
The move followed frenzied activity in the US health insurance market moving towards consolidation under changes made by President Barack Obama's landmark Affordable Care Act.
At the end of June, Cigna rejected a $54 billion buyout offer by rival Anthem as part of efforts by insurance companies to increase their size as a means of obtaining stronger negotiating positions with health care providers. Aetna chairman Mark T Bertolini described the Humana deal as partially reflecting those changes in the sector, but also aiming to provide improved service to clients at affordable prices.
If the deal is completed as expected during the second half of 2016, Aetna says its debt-to-capital ratio will rise to 46 per cent - a level company directors say they will bring down to 40 per cent within two years.
