(Reuters) – U.S. well being insurer Cigna Corp <CI.N> mentioned on Thursday it could purchase pharmacy advantages supervisor Express Scripts Holding Co <ESRX.O> for approximately $54 billion, the newest deal within the sector aimed toward tackling hovering healthcare prices.
The transfer follows the $69 billion merger of insurer Aetna Inc <AET.N> and drugstore chain CVS Health Corp <CVS.N> introduced ultimate December, and highlights a sector-wide development towards offers between corporations that don’t have immediately overlapping operations.
The offers search to decrease healthcare prices by means of bringing beneath one roof pharmacy and scientific claims, and provides the mixed entities larger leverage in worth negotiations with drugmakers.
Cigna’s be offering is composed of $48.75 in money and zero.2434 stocks of inventory of the mixed corporate for every Express Scripts percentage, amounting to $96.03 in line with percentage. That represents a top rate of just about 31 % to Express Scripts’ Wednesday final worth.
Express Scripts stocks had been up 18.6 % at $87.10, whilst Cigna stocks had been down four.25 % at $186.
The transaction is valued at $67 billion, together with about $15 billion in Express Scripts’ debt, the corporate mentioned.
Pharmacy get advantages managers administer prescription drug systems for well being insurers, self-insured corporations and govt companies, negotiating offers with drug producers, operating with pharmacies and processing claims.
The CVS-Aetna deal was once noticed pressuring rival insurers, drugmakers, PBMs and retail pharmacies to imagine mergers or switching companions to check out to stay alongside of the prospective healthcare price financial savings or building up in benefit margins.
The wave of consolidation within the sector additionally comes within the backdrop of a transferring panorama, together with adjustments within the U.S. Affordable Care Act, emerging drug costs and the specter of pageant from Amazon.com Inc <AMZN.O>.
Leerink Partners analyst Ana Gupte mentioned the deal might wonder traders given Cigna has mentioned that they’re glad with their PBM association with UnitedHealth’s <UNH.N> Optum unit.
“It is possible that the threat of an Amazon entry into the healthcare and possibly the drug supply chain landscape, with the latest news of the Amazon/Berkshire Hathaway/JPMorgan employer coalition has spurred Cigna and Express Scripts to tie the knot.”
Amazon, Berkshire Hathaway Inc <BRKa.N> and JPMorgan Chase & Co <JPM.N> mentioned in January they might shape an organization to chop well being prices for masses of hundreds in their workers.
After the deal closes, Cigna shareholders will personal about 64 % of the mixed corporate and Express Scripts shareholders the remainder.
Cigna intends to fund the money portion of the deal via a mixture of money available, Express Scripts debt and new debt issuance. The corporate is anticipated to have debt of about $41.1 billion after the deal closes.
The insurer mentioned it received absolutely dedicated debt financing from Morgan Stanley Senior Funding and The Bank of Tokyo-Mitsubishi UFJ Ltd for the deal.
The mixed corporate shall be led by means of present Cigna Chief Executive Officer David Cordani.
The deal comes a yr after Cigna’s deal to shop for Anthem Inc <ANTM.N> was once blocked by means of antitrust regulators.
Morgan Stanley was once the monetary adviser to Cigna and Wachtell, Lipton, Rosen & Katz was once the prison adviser. Paul, Weiss, Rifkind, Wharton & Garrison LLP is offering regulatory recommend.
Centerview Partners and Lazard Frères had been monetary advisers to Express Scripts, with Skadden, Arps, Slate, Meagher & Flom LLP serving as prison recommend and Holland & Knight LLP as regulatory recommend.
(Additional reporting by means of Abinaya Vijayaraghavan, Philip George and Akshay Lodaya in Bengaluru; Editing by means of Saumyadeb Chakrabarty)