Aetna To Acquire Humana In $37 Bln Cash, Stock Deal

(RTTNews) - Health insurers Aetna (AET) and Humana Inc. (HUM) Friday said they have entered into a definitive agreement for Aetna to acquire all outstanding shares of Humana for a combination of cash and stock valued at $37 billion or $230 per Humana share based on the closing price of Aetna common shares on July 2.

Humana stockholders will receive $125.00 in cash and 0.8375 Aetna common shares for each Humana share. The terms of the agreement have been unanimously approved by the board of directors of each company.

Aetna's shareholders will own about 74 percent of the combined company and Humana's shareholders will own the remaining 26 percent. Closing of the deal is expected to be in the second half of 2016.

The transaction is projected to be neutral to Aetna's 2016 operating earnings per share and produce mid-single digit percentage operating earnings per share accretion in 2017, and low double-digit percentage operating earnings per share accretion in 2018.

According to the companies, the combination brings together Humana's growing Medicare Advantage business with Aetna's diversified portfolio and commercial capabilities, to create a company serving the most seniors in the Medicare Advantage program and the second-largest managed care company in the United States.

The combined entity is expected to help drive better value and higher-quality health care by reducing administrative costs, leveraging best-in-breed practices from the two companies, and enabling the company to better compete with more cost effective products.

The combined company would have projected 2015 operating revenue of $115 billion, with 56 percent from government sponsored programs, including Medicare and Medicaid.

The combined company will have over 33 million medical members, based on memberships as of March 31.

Aetna expects to finance the cash portion of the transaction with a combination of cash on hand and by issuing $16 billion of new term loans, debt and commercial paper.