U.S. well being insurer Cigna mentioned on Thursday it could purchase pharmacy advantages supervisor Express Scripts for about $54 billion, the newest deal within the sector aimed toward tackling hovering healthcare prices.
The transfer follows the $69 billion merger of insurer Aetna and drugstore chain CVS Health introduced final December, and highlights a sector-wide development towards offers between firms that don’t have instantly overlapping operations.
The offers search to decrease healthcare prices by bringing underneath one roof pharmacy and medical claims, and provides the mixed entities better leverage in value negotiations with drugmakers.
Cigna’s supply consists of $48.75 in money and 0.2434 shares of inventory of the mixed firm for every Specific Scripts share, amounting to $96.03 per share. That represents a premium of almost 31 p.c to Specific Scripts’ Wednesday closing value.
Specific Scripts shares had been up 18.6 p.c at $87.10, whereas Cigna shares had been down 4.25 p.c at $186.
The transaction is valued at $67 billion, together with about $15 billion in Specific Scripts’ debt, the corporate mentioned.
Pharmacy profit managers administer prescription drug packages for well being insurers, self-insured firms and authorities companies, negotiating offers with drug producers, working with pharmacies and processing claims.
The CVS-Aetna deal was seen pressuring rival insurers, drugmakers, PBMs and retail pharmacies to contemplate mergers or switching companions to attempt to sustain with the potential healthcare value financial savings or improve in revenue margins.
The wave of consolidation within the sector additionally comes within the backdrop of a shifting panorama, together with modifications within the U.S. Reasonably priced Care Act, rising drug costs and the specter of competitors from Amazon.com Inc.
Leerink Companions analyst Ana Gupte mentioned the deal could shock buyers given Cigna has mentioned that they’re glad with their PBM association with UnitedHealth’s Optum unit.
“It’s doable that the specter of an Amazon entry into the healthcare and probably the drug provide chain panorama, with the newest information of the Amazon/Berkshire Hathaway/JPMorgan employer coalition has spurred Cigna and Specific Scripts to tie the knot.”
After the deal closes, Cigna shareholders will personal about 64 p.c of the mixed firm and Specific Scripts shareholders the remainder.
Cigna intends to fund the money portion of the deal by way of a mix of money readily available, Specific 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 obtained absolutely dedicated debt financing from Morgan Stanley Senior Funding and The Financial institution of Tokyo-Mitsubishi UFJ Ltd for the deal.
The mixed firm will probably be led by present Cigna Chief Government Officer David Cordani.
The deal comes a yr after Cigna’s deal to purchase Anthem was blocked by antitrust regulators.
Morgan Stanley was the monetary adviser to Cigna and Wachtell, Lipton, Rosen & Katz was the authorized adviser. Paul, Weiss, Rifkind, Wharton & Garrison LLP is offering regulatory counsel.
Centerview Companions and Lazard FrEeres had been monetary advisers to Specific Scripts, with Skadden, Arps, Slate, Meagher & Flom LLP serving as authorized counsel and Holland & Knight LLP as regulatory counsel.