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Cigna is in talks to merge with Humana in a deal that would create a US health insurance giant worth $140bn and provide a significant test for antitrust authorities, according to people briefed about the matter.
The two companies have hired advisers who have been discussing a cash and stock deal for more than a month. They hope to get the transaction agreed before the end of the year, the people said.
A combination between Cigna and Humana would help the companies compete with larger rivals such as UnitedHealth Group and Elevance Health, formerly known as Anthem. It would also mark the largest deal of the year between two companies with a combined enterprise value of about $140bn, including debt, in what has otherwise been a tepid mergers and acquisitions environment.
Cigna shares fell 8.1 per cent while those of Humana dropped 5.5 per cent. The Wall Street Journal first reported the discussions on Wednesday.
A potential deal would come amid a tough antitrust environment, particularly for larger transactions and those in the healthcare sector. Both companies have previously had deals blocked. A federal judge ruled in 2017 that a merger between Humana and Aetna was anti-competitive, followed by a similar decision weeks later on a tie-up between Anthem and Cigna.
Cigna was considering selling some existing assets to pre-empt any legal pushback from US regulators, said one person briefed about the matter.
If the deal to combine Humana and Cigna went through it would still be smaller than the largest player, UnitedHealth Group, which has a market value close to $500bn. UnitedHealth generated revenues of $322bn in 2022, while Humana and Cigna together made about $263bn.
The US healthcare system is separated into hundreds of for-profit companies that are under increasing pressure to cut costs, which has spurred consolidation in the sector. CVS Health, the largest pharmacy chain in the US, in 2018 acquired Aetna for $69bn and Cigna combined with Express Scripts in a $67bn deal, including debt.
A spokesperson for Humana declined to comment on the deal talks. Representatives for Cigna did not return multiple requests for comment.
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