US health insurance giants to merge in $37bn deal

The Connecticut-based Aetna will pay the equivalent of $230 per share in cash and stock

Aetna, the second largest US health insurer, has agreed to buy its smaller rival Humana for $37bn (£24bn) in the largest deal in the industry to date.

The American health insurance sector has been rife with consolidation speculation in recent months, with rumours reaching fever pitch since the Supreme Court’s decision to uphold the Affordable Care Act (ACA), otherwise known as Obamacare.

The Connecticut-based Aetna will pay the equivalent of $230 per share in cash and stock, a 21 per cent premium to Humana’s closing price on Thursday. The US markets were closed yesterday for the 4 July national holiday.

Humana, based in Louisville, Kentucky, is the fifth-largest health insurer in the US. Its business is dominated by Medicare and Medicaid customers, where it controls approximately 19 per cent of the US market. Medicare and Medicaid are government-financed programmes available to low-income and senior citizens, a market that has expanded significantly since the ACA became law.

Following the deal, the new company is expected to generate revenues of $115bn, with 56 per cent of that coming from government programmes.

The deal will be subject to regulatory approval, something that recently has become anything but a given. US regulators have recently blocked mergers between cable television companies Time Warner Cable and Comcast and food suppliers Sysco and US Foods.