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A $54 billion deal makes Anthem the U.S.’s biggest health insurer

The deal will create a national champion--and a headache for customers and regulators.The deal will create a national champion--and a headache for customers and regulators.
The deal will create a national champion--and a headache for customers and regulators.Photograph by Aaron P. Bernstein — Getty Images

Anthem Inc (ANTM) said Friday it would buy Cigna Corp (CI) in a deal valued at $54.2 billion, creating the largest U.S. health insurer by membership.

The deal–the biggest ever in the health insurance industry–comes three weeks after Aetna Inc (AET) agreed to buy Humana Inc (HUM) for $37 billion and is part of an industry-wide consolidation following the roll-out of the Obama government’s healthcare reform law.

The deal is valued at $183.36 per share based on Anthem’s Thursday close of $155.21. Anthem said it will pay $103.40 in cash and 0.5152 of its shares for every Cigna share held.

Anthem said the offer is valued at $188 per share, based on Anthem’s unaffected share price as of May 28 before reports that the two companies were in merger talks.

Anthem has said the acquisition will help it reduce costs and allow it to negotiate lower prices with doctors and hospitals.

Anthem said it is confident in its ability to obtain all necessary regulatory and other approvals.

However, experts have said that the deal is likely to face close scrutiny from antitrust regulators, amid signs that reduced competition may lead to higher costs for consumers.

The companies are two of just four major insurers that administer self-insured plans for major companies.

“When you go from four to three national players, that creates a significant issue,” said Matthew Cantor of law firm Constantine Cannon LLP.

The combined company will be led by Anthem Chief Executive Joseph Swedish. Cigna Chief Executive David Cordani will be president and chief operating officer.

Anthem’s lead financial adviser is UBS Investment Bank. Credit Suisse also served as financial adviser, and White & Case LLP as legal adviser.

Morgan Stanley is Cigna’s financial adviser and Cravath, Swaine & Moore LLP its legal adviser.