Report: Health Insurer Humana Considering a Sale

30 May 2015 | Author: | No comments yet »

Humana Said to Explore Sale After Approach by Insurer Cigna.

Leerink’s Ana Gupte argues that Humana’s (HUM) announcement that it is putting itself on the block is the “first domino in overdue managed care M+A” that appears set to fall, one that will ultimately result in a “Big 3″: A first domino in overdue managed care M+A seems set to fall.Humana—which had a market value of about $27 billion before its stock rose Friday—is working with Goldman Sachs on a potential sale, The Wall Street Journal reported, citing sources.Humana Inc. is exploring a sale, after the health insurer was approached by Cigna Corp. about a potential deal, a person with knowledge of the matter said. Intraday, managed care company Humana has been reported in national press to have received indications of takeover interest and is working with its financial advisor.

Acquiring Humana would vault Cigna to the lead in the market for Medicare Advantage policies, the health insurer-run version of the U.S.’s program to cover the elderly and disabled. This is line with our recently published view that Humana’s Medicare Advantage franchise will spur near-term acquisition interest in Humana from industry consolidators.

Press reports say that Aetna (AET) and Cigna (CI) have held preliminary discussions with Humana; we can’t confirm that, but we’d expect these companies to be interested and Anthem (ANTM) as well to have interest…We view this step as a trigger event in a managed care industry overdue for consolidation; we expect the next year will see multiple strategic actions among the major players. We remain bullish on the sector broadly for both fundamental reasons and the benefits to shareholders from such consolidation… One of the reasons that we think a wave of consolidation is overdue is that we view the industry as being too fragmented. In an interview this month at Humana’s headquarters in Louisville, Kentucky, Humana Chief Executive Officer Bruce Broussard didn’t want to talk about whether his company could be a takeover target. “In general I would agree, over time that consolidation will happen,” Broussard said. “Will Humana be part of it? We think that industry entrants WellCare Health Plans (WCG), Centene (CNC), Health Net (HNT) and Molina Healthcare (MOH) would be among those companies that would be viewed as attractive acquisition targets.

Though with an aging U.S. population and the disruption to insurance markets from 2010’s Patient Protection and Affordable Care Act, the sector may be ripe for deals. Since May 2010, Humana’s shares have almost quadrupled, compared with a 160 percent increase in the Standard & Poor’s 500 Managed Health Care Index of five insurers.

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