Cigna to buy Express Scripts for $54 billion

Reports: Cigna close to buying Express Scripts

Reports: Cigna close to buying Express Scripts

Shares of Express Scripts jumped 20 percent to $88.44 at 7:07 a.m.in premarket trading in NY, while shares of Cigna declined 4.8 percent to $185.

Cigna shares fell 10.2 percent to $174.45.

USA health insurer Cigna Corporation has entered into a definitive agreement to acquire pharmacy benefit manager Express Scripts for a cash and stock transaction of approximately $67 billion, including about $15 billion in Express Scripts' debt.

Express Scripts, which employees thousands of employees at its Columbus facility, runs prescription-drug plans for employers, insurers and others.

All told, the companies project $600 million in annual savings. The terms represent a roughly 31 percent premium to Express Scripts' closing price on Wednesday, according to the statement. We will continue to have a distinct focus at Express Scripts and eviCore on partnering with health plans, and together, build tailored solutions for health plans and their members.

The Express Scripts combination would put the Cigna model closer to that of UnitedHealth Group Inc (UNH.N), the industry's biggest health insurer. Sanford C. Bernstein downgraded Express Scripts from a "market perform" rating to an "underperform" rating and increased their target price for the stock from $55.80 to $77.50 in a research note on Tuesday, January 30th. The move, following on the heels of Aetna's merger with CVS Health, could lower costs for consumers, at least in theory.

Health insurer Cigna Corp.

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The companies say they expect the deal to close by the end of 2018, but it must pass antitrust and regulatory scrutiny. Once the transaction has closed, Cigna shareholders will own around 64% of the combined company while Express shareholders will own the rest.

Companies are finding that consolidation is needed today in the health insurance industry as more and more insurers are joining forces with companies that are not in direct competition but complement what they already have making them more of a one stop shop for potential clients.

"First and foremost, we believe this transaction delivers attractive value to the Express Scripts shareholders" said Tim Wentworth, President and Chief Executive Officer of Express Scripts.

Cigna intends to fund the cash portion of the deal through a combination of cash on hand, Express Scripts debt and new debt issuance.

The agreement reached between the two firms enables Cigna to pay a cash of $48.75 and 0.2434 shares. Including Express Scripts' debt, the deal is worth around $67 billion.

Morgan Stanley was the financial adviser to Cigna and Wachtell, Lipton, Rosen & Katz was the legal adviser. Provise Mngmt Lc has invested 0.37% in Express Scripts Holding Company (NASDAQ:ESRX).

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