Today's Market: Health Insurers Try To Find Partners In Merger Roulette

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Includes: AET, ANTM, CI, HUM, UNH
by: Matthew Smith

Summary

Health insurers are looking for partners as M&A activity ramps up.

CI has turned down numerous offers from ANTH, forcing its suitor to take its offer public.

AET has made an offer for HUM, but both companies have possible other suitors who could launch bids.

Markets are rallying today on hopes that a deal with Greece can be reached after the Greeks decided to come to the table today and meet with their European partners. Listening and working towards a beneficial deal never hurts and it appears that investors are cheering, and in some cases rewarding, Greece for acting more like grown-ups. Major hurdles still exist, but the fact that the Greeks are going to be present and taking part in discussions at this emergency meeting indicate that some sort of a deal is possible. Looking back, Friday's move by the ECB to extend emergency measures for Greek banks might have been the olive branch that Greece's leaders needed to return to the negotiations.

Chart of the Day:

A worldwide rally is on as investors cheer globally that a deal with Greece may finally get done. Rising the most are the European markets, with the German DAX marching higher by 2.68% today. Maybe 11,000 will mark the bottom of the German market's decline.

Source: CNBC

We have economic news today, and it is as follows:

  • Existing Home Sales (10:00 a.m. EST): Est: 5.26 M

The Asian markets are higher today:

  • All Ordinaries - up 0.24%
  • Shanghai Composite - CLOSED
  • Nikkei 225 - up 1.26%
  • NZSE 50 - down 0.17%
  • Seoul Composite - up 0.40%

In Europe, markets are higher today:

  • CAC 40 - up 2.59%
  • DAX - up 2.68%
  • FTSE 100 - up 1.07%
  • OSE - up 2.00%

Cigna Turns Down Anthem...Again

The rumors about Anthem (NYSE:ANTM) pursuing Cigna (NYSE:CI) were not only true, but understated just how far along in negotiations that the two health insurers were at the time. As it turns out, Cigna has turned down a total of four offers, with the latest offer from Anthem equating to $184/share. It is a heck of an offer, and to think that shareholders are simply going to let management chase off a potential suitor willing to pay a 35% premium would be a mistake by Cigna's leaders.

The two companies have sent heated letters to each other, with Anthem saying that Cigna has made outlandish demands such as a split board and its CEO immediately taking the reins of the combined company; even though it is the seller. Cigna points to a number of shortfalls on Anthem's part, including its lack of growth and issues which could hinder the company moving forward, such as the data breach and being a member of the Blue Cross Blue Shield Association.

While the 35% premium seems more than fair, look for Anthem to increase its offer one last time and put the pressure on Cigna to explain to its shareholders why a deal does not work. UnitedHealth Group (NYSE:UNH) is still out there and could be used for leverage, but Cigna cannot let Anthem walk away and UnitedHealth appears more interested in Aetna (NYSE:AET) right now.

Aetna Makes Offer For Humana

As previously rumored, Aetna made an offer for Humana (NYSE:HUM) in an effort to offset the potential combination of Anthem and Cigna. The details surrounding this offer are much more secretive as neither side has gone public as Anthem did in its latest bid for Cigna. Details of this deal come from The Wall Street Journal, which says that this deal is reactionary and that Aetna's offer was made in the last few days.

What makes this interesting is that Cigna also has interest in Humana and could use a bid for Humana to force Anthem to walk away. It would be an interesting move as it would totally change the expected tie-ups many industry watchers have been expecting and result in Anthem being left out of the M&A activity rather than UnitedHealth.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.