LONDON, UK / ACCESSWIRE / February 15, 2017 / Active Wall St. blog coverage looks at the headline from Aetna Inc. (NYSE: AET) and Humana Inc. (NYSE: HUM) as both companies announced on February 14, 2017, that they have mutually decided to end their merger agreement announced in July 2015. The decision was taken by both Companies after Judge John D. Bates of the District Court for the District of Columbia blocked the merger in January 2017. Register with us now for your free membership and blog access at:
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Commenting on the decision to move away from the merger, Mark T. Bertolini, Chairman and CEO of Aetna said:
"We are disappointed to take this course of action after 19 months of planning, but both Companies need to move forward with their respective strategies in order to continue to meet member expectations."
Responding on the matter, Bruce D. Broussard, President and CEO of Humana said:
"As an independent Company, we will continue to innovate and sharpen our focus on the local healthcare experience of all our members, especially seniors living with chronic conditions."
Aetna's Future Plans
Following the decision to move on, Aetna will pay Humana $1 billion as termination fee. Furthermore, Aetna also announced the cancellation of its agreement with Molina Healthcare, Inc. (NYSE: MOH) to sell some of its Medicare Advantage assets. Aetna has said that it would pay the necessary termination fee to Molina for cancelling the sale agreement.
In the same announcement, Aetna announced the complete redemption of its Special Mandatory Redemption Notes (SMRN) for cash on or before March 16, 2017. These $10.2 billion worth of SMRN were issued by Aetna in June 2016 at different interest rates and redemption dates starting from June 2019 – June 2016. These SMRN carry a special mandatory redemption price of 101% of the aggregate principal amount plus any interest accrued and unpaid to, but excluding, the special mandatory redemption date.
Humana's future plans
Going forward, Humana plans to focus and build integrated care for people with chronic conditions – particularly those aging into or already in Medicare Advantage or dual eligible plans. Along with this, the Company plans to focus on the employer group customers by bringing value-added capabilities to this group. Humana will leverage its clinical and operating platforms for enhancing its partnerships with doctors and other healthcare professionals. To achieve the success of this strategic business plan, Humana plans to offer sophisticated population health technology and services, and expanding primary care clinics. Humana plans to expand its clinical capabilities by focusing on the services beyond the conventional doctors' offices and institutions viz., home health services, local pharmacy access and behavioural health. Humana aims to take advantage of analytics and technology to increase transparency and improve interactions between healthcare professionals, Humana's customers and Humana. Humana also plans to discontinue its individual commercial medical coverage from 2018 as it feels that the same is being covered by the on-exchange federal Marketplaces.
Humana announced a cash dividend of $0.40 per share to its shareholders, which is payable on April 28, 2017. Humana also plans to increase its shareholders' value by way of share repurchases of over $2 billion in 2017. It plans to complete $1.5 billion accelerated share repurchase program in Q12017 and balance $500 million later on.
The case timeline
July 2015 – Two of the largest health insurance Companies in the US - Aetna and Humana announced their decision to merge. Aetna agreed to acquire Humana in a cash plus stock deal of $37 billion.
July 2016 – Department of Justice (DOJ) file anti-trust suits in the US District Court which stalled the proposed mergers between Aetna – Humana and another big merger Cigna Corp.- Anthem Inc. All four companies opposed the lawsuit.
August 2016 – Aetna reduced its participation in Obamacare. The Company announced to reduce its individual public exchange participation from 778 to 242 counties for 2017. The timing of this move was seen as a pressure tactic to push the government to allow the Aetna – Humana merger.
December 2016 – The Antitrust trial against the Aetna-Humana merger brought on by the DOJ started.
January 2017 – After a 13-day trial in December 2016, Judge John D. Bates of the District Court for the District of Columbia blocked the Aetna – Humana merger. The Federal Judge ruling stated that the deal violates several federal antitrust laws and would reduce competition in the Medicare Advantage market and in some of the exchanges set up under the Affordable Care Act. At this time, Aetna had considered appealing against the Court's decision but Humana had not made any comments.
February 2017 – Aetna and Humana agreed to end merger agreement and move forward.
Stock Performance
On Tuesday, February 14, 2017, the stock closed the trading session at $125.81, climbing 3.08% from its previous closing price of $122.05. A total volume of 5.14 million shares have exchanged hands, which was higher than the 3-month average volume of 3.07 million shares. Aetna's stock price advanced 5.69% in the last three months, 6.02% in the past six months, and 24.20% in the previous twelve months. Moreover, the stock is trading at a PE ratio of 19.62 and has a dividend yield of 0.79%.
Humana's share price finished yesterday's trading session at $205.97, marginally down 0.35%. A total volume of 2.23 million shares exchanged hands, which was higher than the 3 months' average volume of 1.63 million shares. The stock has rallied 15.01% and 24.38% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 1.10%. The stock is trading at a PE ratio of 50.89 and has a dividend yield of 0.56%.
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