WASHINGTON (dpa-AFX) - Health insurer Anthem Inc. (ANTM) said Saturday that it has submitted a non-binding proposal to acquire Cigna Corp. (CI) for $184 per share in cash and stock, valuing the company at $53.8 billion on an enterprise basis.
The offer represents an 'unaffected' premium to Cigna's stockholders of more than 35.4%, based on the closing price of Cigna's shares on May 28, 2015.
Under the contemplated terms, the consideration would consist of about 31.4% Anthem shares and 68.6% cash and the combined company would reflect a pro forma equity ownership comprised of approximately 76.3% Anthem shareholders and approximately 23.7% Cigna stockholders.
Anthem said it is also confident in its ability to complete any financing related to the acquisition.
'The proposed combination would create a premiere health benefits company with critical diversification and scale to lead the transformation of health care delivery for consumers. The combined company would be an industry leader with greater than $115 billion in annual revenues, based on the most recent 2015 outlook publicly reported by both companies,' Anthem said.
Anthem expects the combination would be accretive to operating earnings per share and that the combined enterprise would generate significant annual cost synergies by achieving operating and G&A efficiencies.
Anthem expects to achieve adjusted earnings per share accretion of greater than 10% in year one, with the accretion more than doubling by year two following the closing of the transaction. Anthem is confident in the achievability of synergies and is committed to retaining investment grade debt ratings.
Anthem is confident in its ability to obtain regulatory approvals. In the course of previous negotiations, both companies have expressed a confidence that regulatory approval would not delay the consummation of the combination. This includes matters related to the Blue Cross Blue Shield Association.
'The Anthem Board of Directors and management team are highly committed to pursuing this exciting opportunity, and stand ready to finalize due diligence and negotiations on a definitive agreement. We are disappointed that Cigna's insistence on uncommon governance demands has impeded the realization of this combination for shareholders and all stakeholders. With the cooperation of Cigna management and Board of Directors, we expect that we could reach a mutually agreeable and negotiated transaction by the end of June 2015,' said Joseph Swedish, president and chief executive officer of Anthem.
Anthem noted that it has been engaged with Cigna to explore a potential combination since August 2014 and is making its proposal public today following Cigna's refusal to reasonably negotiate and its insistence on securing governance matters that are not common practice in similar transactions. Anthem is confident in the value being offered, the growth potential of the combined company and its ability to successfully integrate the two organizations.
'In response to our June 18 proposal we received a letter from Mr. Cordani on June 19 stating an appreciation for the $184 per share offer price, requesting a 50% cash and 50% stock mix of consideration (versus the 68.6% cash and 31.4% stock mix offered in our June 18 proposal), proposing that I would serve as CEO for 12 months following closing and Chairman for 24 months following closing and that Mr. Cordani and I would jointly serve as co-chairs of the integration committee for 24 months following closing,' Joseph said in a letter to Cigna.
In response to the June 19 letter, Anthem communicated that it would be prepared to proceed with a transaction at $180 per share, with a mix of consideration consisting of 60% cash and 40% stock, an 8-6 Board split of legacy Anthem and Cigna directors in the combined company with supermajority Board approval protections and that Joseph would serve as CEO and Mr. Cordani would serve as President and Chief Operating Officer, each for 24 months following closing.
In addition, Joseph would serve as Chairman of the Board and, for 24 months following the closing, Mr. Cordani, and Joseph would jointly serve as co-chairs of the integration committee.
Anthem also communicated that upon Joseph's stepping down as CEO after this 24 month period, there would be no guarantee of CEO succession, the future CEO would be chosen by the Board at that time and that Joseph could potentially continue as Chairman.
Finally, Anthem stated that in order to proceed on this basis, it needed a mutual 2 week exclusivity period to be agreed upon by 3:00 PM EDT today. In response to Cigna request that Anthem confirmed its position that it would not be willing to guarantee Mr. Cordani the CEO role after 24 months, Anthem advisors explained to Cigna advisors yesterday evening that the Anthem Board has unequivocally determined it cannot guarantee who will lead the company 2 years from closing.
Anthem's position is clear - if Mr. Cordani is not named CEO by the combined Board after this 2 year period, he would have the right to terminate his employment and be paid a severance amount to be negotiated.
'Your financial advisor responded by stating our position on CEO succession would lead you to be unable to respond to our proposal or honor today's 3:00PM EDT deadline and your legal advisor told our legal advisor that you would not agree to our requested 2 week exclusivity period,' Anthem said.
'We were stunned that the Cigna Board continues to insist on a guaranteed CEO position for Mr. Cordani over choosing to allow its stockholders to realize the significant premium being offered. We therefore are now reaffirming our June 18 proposal for a combination of our companies, which we believe your stockholders will find more compelling,' Anthem said.
ANTM closed Friday's trading at $165.06, down $0.18 or 0.11%. However, in after-hours trading, the stock gained $0.18 or 0.11% ended at $165.24.
CI closed Friday's trading at $155.26, down $1.15 or 0.74%. However, in after-hours trading, the stock gained $1.14 or $0.73% ended at $156.40.
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