Anthem to acquire Cigna in $54.2 billion deal

Following a rush of speculation about a coming deal between the two insurance giants, Anthem and Cigna officially announced Friday morning that Anthem will acquire its smaller counterpart in a $54.2 billion deal.

The deal, valued at $188 per share, is the largest ever among U.S. health insurers following a $37 billion deal between Aetna and Humana. It comes after the two companies sparred over a previous acquisition bid that Anthem took public and the Cigna board of directors rejected and characterized as "deeply disappointing."

The deal, which still faces regulatory approval, will allow the combined companies to serve 53 million medical members, or roughly 17 percent of the U.S. population, Anthem CEO Joseph Swedish said in a conference call with investors Friday. The acqusition of Cigna will help Anthem expand into the Medicare Advantage market and take advantage of the smaller company's "highly regarded" wellness programs, among other benefits, he said. For Cigna, one of the benefits of the deal will be to tap into Anthem's Medicaid business, he added.

"At the end of the day, what's been configured today is something that works for both organizations today and something that works for both organizations over the long haul," Cigna CEO David Cordani said. "In short, both of our businesses will be stronger together."

Swedish will serve as chairman and CEO of the combined company and Cordani will serve as president and chief operating officer, the executives said. Governance issues were a key sticking point in negotiations between the two companies. The combined company's board will include nine directors from Anthem and five from Cigna.

Branding related to Anthem's Blue Cross Blue Shield afilliation was another sticking point in the Anthem-Cigna negotiations. Swedish said the two companies have analyzed how these branding rules would apply to the transaction, and will approach BCBS to iron out the details now that the deal has been announced. 

"We are a 'blue' organization and will remain blue--I want to underscore that," he said, adding that the transaction gives Anthem "tremendous opportunity" to expand its footprint into non-blue states.

Check back with FierceHealthPayer for more details as this story develops.

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