Months before Cigna began negotiating with Express Scripts, the insurer was in talks with another large publicly traded healthcare company.
But the discussion of a strategic partnership that began in September never progressed into serious negotiations, and the insurer ultimately determined there was more value in acquiring the pharmacy benefit manager, according to a financial filing by the companies this week. The filings didn't indicate which company Cigna was in discussions with.
A month later, Cigna and Express Scripts executives met to discuss a possible “white label” commercial arrangement, which eventually transformed into acquisition talks. Five months later, the two companies inked a $67 billion deal.
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The filing includes several interesting factors that impacted the deal:
- Despite shopping around after its deal with Anthem fell through in May 2017, Cigna received no acquisition offers or interest from any third parties, prompting it to look for an acquisition.
- The terms of the deal fluctuated between the beginning of January, when Cigna made its first offer, and the final deal in March. Cigna’s initially offering was $87-$89 per share. Express Scripts balked at that offer and countered weeks later at $102 a share. The two companies eventually settled on a $97.50 per share price.
- Amazon made a brief appearance in the discussions when the Express Scripts board of directors acknowledged the potential entry of “significant new participants” in the healthcare industry during a December meeting. Another topic of discussion: The CVS-Aetna deal announced earlier that month.
- Anthem’s decision to terminate its contract with Express Scripts in April of last year factored into the company's decision to sell. Express Scripts CEO Tim Wentworth also highlighted “recent consolidation trends” as well as the “regulatory and political climate” and “continued competitive pressure” as reasons the board should seriously consider Cigna’s offer.
- The regulatory termination fee tied to the deal reach as high as $3.25 billion, part of the counteroffer proposed by Express Scripts in February. The two companies eventually agreed Cigna would pay a $2.1 billion breakup fee if the Department of Justice doesn’t approve the deal.
Express Scripts and Cigna expect the deal to close by the end of the year.