Health insurer giant Cigna Corp. has announced that it will buy Express Script Holding Company in a transaction of cash and stock that is valued at approximately $67 billion and includes the assumption by Cigna of $15 billion of debt Express Scripts has, both companies announced early Thursday.
Under the agreement, the transaction will include cash equal to $48.75 and 0.2434 shares of stock in the new entity per each share of Express Scripts or approximately $54 billion in aggregate.
The deal, which the two parties believe will be completed before the end of 2018, was given approval by both companies’ board of directors.
Upon the transaction closing, shareholders of Cigna will own 64% of the new combined entity and shareholders of Express Scripts the difference.
The consideration represents a premium of approximately 31% to the closing prices of Express Scripts stock as of March 7, 2018.
Upon the closing of the newly combined company David Cordani the CEO and President of Cigna will become the CEO and President. Tim Wentworth, the CEO and President of Express Scripts will take over the role of Express Scripts president.
The board of directors in the new entity will be increased to 13, including four that are independent members of the board at Express Scripts.
The newly combined company is to be named Cigna, and the headquarters will be that of Cigna’s current headquarters in Bloomfield, Connecticut, and Express Scripts will have its headquarters located in St. Louis, Missouri.
The combined entity at closing will make an investment incrementally of $200 million to its charitable foundation that supports communities where it operates.
Cigna said that the acquisition will deliver double-digit per share earnings the first year and will also enhance its earnings and revenue growth.
Companies are finding that consolidation is needed today in the health insurance industry as more and more insurers are joining forces with companies that are not in direct competition but complement what they already have making them more of a one stop shop for potential clients.
The health insurance industry is still waiting on lawmakers in Washington to come up with a final healthcare plan that will either eliminate the Affordable Care Act as it is known, or will be a complement to the measure.