Cigna Acquires Express Scripts in $67B Deal

11 Mar 2018 | SOURCE: Healthcare Dive
Cigna acquiring Express Scripts in $67B deal
Image from the WSJ

Cigna said Thursday it is acquiring Express Scripts in a cash and stock transaction valued at $67 billion, including debt. The deal is expected to close by the end of this year.

The combined company will offer “a full suite of medical, behavioral, specialty pharmacy and other health engagement services” across a “wide array of retail and online distribution channels,” according to a news release.

Cigna CEO David Cordani, who will run the new combined company, said in a statement the transaction “will create an expanded portfolio of health services, delivering greater consumer choice, closer alignment between the customer and health care provider, and more personalized value.”

The deal is a vertical alignment that calls to mind the proposed CVS-Aetna merger, valued at about $70 billion. After several failed horizontal merger attempts in recent years, healthcare companies are trying to insert themselves into more areas along the care continuum in hopes of finding efficiencies while improving cost and care quality.

On an investor call, Cigna executives said they expect the deal to result in earnings per share increasing from $18 to $20-21 by 2021 and a long-term annual growth rate of 6% to 8%.

At the close of the deal, Cigna shareholders will own about 64% of the combined company and Express Scripts shareholders will own about 36%. The transaction is still subject to approval by each company’s shareholders and regulatory approvals.

In an earnings call last month, Cigna reported its total revenue increased 5% to $41.6 billion in 2017, and said health insurance membership grew by 700,000 to 15.9 million members. Cigna has been focusing on the commercial side while other payers have looked toward growing Medicare Advantage membership. Cigna re-entered the MA market in June after CMS lifted a suspension imposed because of issues with the payers appeals and grievances processes.

In 2015, Cigna attempted to merge with Anthem, but regulators blocked the deal. Anthem had been a major customer for Express Scripts, but said last year it would not be renewing the contract and was instead planning to launch a new pharmacy benefit management company, with CVS providing prescription fulfillment and claims processing services.

Express Scripts is fresh off an announcement it will team up with Walgreens Boots Alliance to expand group purchasing efforts for specialty pharmaceuticals. In October, Express Scripts said it was acquiring medical benefits manager eviCore for $3.6 billion.

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