Cigna Drops Humana Pursuit and Plans for Stock Buybacks Instead
Cigna Corporation, a global health service company, has announced that it will no longer pursue a merger with Humana Inc. and will instead focus on stock buybacks. The news comes after the U.S. Department of Justice (DOJ) filed a lawsuit to block the proposed merger.
Background of the Merger
In July 2020, Cigna and Humana announced their plans to merge in a $54 billion deal. The merger would have created the largest health insurer in the U.S., with more than 37 million members. The companies argued that the merger would create a more efficient and cost-effective health care system.
However, the DOJ argued that the merger would reduce competition and lead to higher prices for consumers. The DOJ filed a lawsuit to block the merger in October 2020.
Cigna’s Decision to Drop Merger
In December 2020, Cigna announced that it was dropping its pursuit of the merger with Humana. The company said that it had decided to focus on stock buybacks instead.
Cigna CEO David Cordani said that the company had decided to focus on stock buybacks because it was the best way to create value for shareholders. He said that the company had determined that the merger was unlikely to be approved by the DOJ and that it was in the best interest of shareholders to focus on stock buybacks instead.
Cigna’s Stock Buyback Plan
Cigna has announced a plan to buy back up to $2 billion of its stock. The company said that it would use the money to repurchase shares of its common stock in the open market or in privately negotiated transactions.
The company said that the buyback program would be funded with cash on hand and that it would be completed over the next 12 months. The company also said that it would continue to evaluate other opportunities to create value for shareholders.
Impact of Cigna’s Decision
Cigna’s decision to drop the merger and focus on stock buybacks is likely to have a positive impact on the company’s stock price. Analysts expect that the stock buyback program will boost the company’s earnings per share and increase its value.
The decision is also likely to have a positive impact on the health care industry. The DOJ’s lawsuit to block the merger was seen as a sign that the government was taking a tougher stance on mergers that could reduce competition and lead to higher prices for consumers.
Humana’s Response
Humana has not yet commented on Cigna’s decision to drop the merger and focus on stock buybacks. However, the company is likely to be relieved that the merger is no longer being pursued.
The merger had been seen as a way for Humana to expand its market share and become a larger player in the health care industry. Without the merger, Humana will have to find other ways to grow its business.
Conclusion
Cigna’s decision to drop its pursuit of the merger with Humana and focus on stock buybacks is likely to have a positive impact on the company’s stock price and the health care industry. The decision is also likely to be welcomed by Humana, which will now have to find other ways to grow its business.