Humana Inc. (HUM) to be Acquired by Aetna in $37B Deal
Shares of Humana Inc. (HUM) were trading up +2.90 or +1.55 percent to $190.40 per share in Monday's premarket. News broke late Friday that the company would be taken over by Aetna Inc. (AET) in a deal worth $37B. Humana stock closed at $187.50, down -5.64 or -2.92 percent in Thursday's regular trading session.
Louisville, Kentucky based Humana Inc. is a major national health insurer, being the fourth largest domestic health insurance company by revenue.
Hartford, Connecticut based Aetna Inc. is one of the nation's largest diversified health care companies and the country's third largest health insurer by revenue. The company services over 46 million people across the country with health related information and resources and specializes in traditional health care insurance plans, as well as long term care, dental, medical, pharmaceutical and disability insurance.
In a joint statement issued after Thursday's market close, the companies announced that Aetna will acquire all outstanding shares of Humana for a combination of cash and stock with a value of $37 billion, or about $230 per each Humana share based on Aetna's closing price on July 2nd. Under the deal's terms, Humana shareholders will receive $125.00 in cash and 0.8375 share of Aetna common stock for each share of Humana.
The end result of the transaction will leave Aetna shareholders with approximately 74 percent of the combined company, while Humana shareholders will get about 26 percent. Aetna plans to finance the deal with its cash on hand, as well as issuing around $16 billion of debt, new term loans and commercial paper.
Bruce D. Broussard, President and Chief Executive Officer of Humana stated in the joint press release that, "Through the use of technology and integrated services to simplify the consumer experience, the combined entity will be even more effective in meeting the health needs of many more people -- especially people with chronic conditions, who will benefit from Humana's home health, pharmacy management, and data analytics programs. The transaction is a testament to the accomplishments of Humana associates and an outstanding outcome for our shareholders, who will receive an immediate premium and the opportunity to participate in the growth potential of the combined organization.
After the close of the transaction, expected to be by the second half of 2016, the combined company is expected to have a debt to capital ratio of 46 percent, which is expected to fall to 40 percent over a 24 month period. In addition, Aetna will move its headquarters for its Medicare, Medicaid and TRICARE businesses to Louisville once the transaction closes.
Once completed, the combined company will have 33 million medical members based on membership of both companies at the end of March of 2015. Projected revenue for the combined company for 2015 is expected to be $115 billion, with about 56 percent coming from government sponsored programs.
Humana stock has sold off sharply in this morning's premarket, having been up as much as +5.5 percent earlier, shares are up only about two percent now. Aetna stock is also selling off; trading down almost six percent before the market opens as a result of Humana's just announced cut to its current quarter guidance from $8.50 - $9.00 to $7.75 per share.
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