Hartford, Connecticut-based Aetna Inc. has announced its intent to acquire Humana Inc. in a $37 billion deal that would significantly boost the combined company’s revenue and its presence in the Medicare business, if approved by regulators.
The deal, which values Humana’s stock at $230 per share, could make the combined company the second-largest managed care company in the United States by sales, serving the largest number of seniors in the burgeoning Medicare Advantage program, according to a release on the proposed merger.
The merger announcement is the latest in a flurry of efforts among the country’s largest health insurers to reduce costs and improve efficiencies and negotiating power within the health care system through possible consolidations.
“The acquisition of Humana aligns two great companies and will significantly advance our strategy of more effectively serving members in a rapidly changing health care industry,” said Aetna chairman and CEO Mark T Bertolini in an announcement of the proposed merger. Bertolini will serve in the same role for the combined company after the close of the transaction, and the company’s board would increase to 16 members, with four additional Humana directors.
If the deal is approved, Humana stockholders would get $125 in cash and .8375 Aetna common shares for each Humana share. Aetna shareholders would control roughly 74 percent of the combined company, and Humana shareholders would own the remaining 26 percent.
The combined company would have more than 33 million medical members and a projected 2015 operating revenue of about $115 billion, with approximately 56 percent coming from government-sponsored programs, including Medicare and Medicaid. the membership would include Humana’s roughly 3 million members in the TRICARE program for military families and retirees. In addition, Aetna’s Medicare Advantage membership would increase to 4.4 million.
Aetna has also announced its intent to make Louisville, the corporate headquarters of Humana, the headquarters for its Medicare, Medicaid and TRICARE business after the deal’s closing. The deal, which Aetna projects will be completed during the second half of 2016, is subject to approval by state departments of insurance and other regulators, as well as Humana stockholders and Aetna shareholders.