Icahn, with sizable stake in Cigna, to oppose Express Scripts acquisition: WSJ
Reuters
Published Aug 01, 2018 06:12PM ET
Icahn, with sizable stake in Cigna, to oppose Express Scripts acquisition: WSJ
By Michael Erman and Caroline Humer
(Reuters) - Billionaire investor Carl Icahn has a sizable stake in health insurer Cigna (N:CI) and plans to vote against its planned $52 billion acquisition of pharmacy benefits manager Express Scripts (O:ESRX), the Wall Street Journal reported https://www.wsj.com/articles/carl-icahn-has-sizable-stake-in-cigna-plans-to-vote-against-express-scripts-deal-1533150217 on Wednesday.
Icahn believes Cigna is paying too high a price for Express Scripts, the Journal reported, citing people familiar with the matter.
The Journal said Icahn's stake was less than 5.0 percent of Cigna's shares.
Cigna shareholders are scheduled to vote on the deal on Aug. 24. The two companies hope the deal will help them hold onto profits despite scrutiny for rising healthcare costs.
Cigna's shares closed up 2.0 percent on Wednesday afternoon, while Express Scripts' stock slid nearly 7.0 percent.
Express Scripts shares have been trading well below the value of Cigna's bid.
The arbitrage spread of the deal, which measures that difference, widened to more than 25 percent from 18 percent after Icahn's stake was revealed, suggesting investor skepticism the deal can close.
"Clearly there had been shareholder disappointment and discontent post the transaction announcement," Evercore ISI analysts Mike Newshel and Ross Muken said in a research note
Express Scripts business model is in question, and on its own would likely be worth $57 to $62 a share, they said.
Cigna would be better off doing a share buyback of $7 billion to $10 billion, buying smaller pharmacy benefit managers, and increasing its government paid business, they said.
Leerink Research analyst Ana Gupte doesn't believe investors will vote the deal down, noting that Icahn would need to get other large investors on board.
"I don’t know if he could do that," she said.
Neither Icahn nor Cigna immediately responded to Reuters' requests for comment.
Express Scripts spokesman Brian Henry said the deal would "deliver significant value to shareholders."
Cigna announced the deal in March, looking for new ways to boost profits as the industry faces greater scrutiny for rising healthcare costs.
They say the deal could generate $600 million in savings per year and help Cigna more closely manage how costly drugs are prescribed and delivered to patients.
But headwinds for the companies have strengthened since the deal was announced.
Pharmacy benefits managers (PBMs) like Express Scripts have been in the crosshairs of the Trump administration, which is looking at scaling back or eliminating rebates from drug purchases that are diverted to middlemen like PBMs.
Get The News You Want
Amazon.com Inc (O:AMZN) has also purchased an online pharmacy that Wall Street analysts say can help it undercut traditional prescription drug sales.
The deal followed the $69 billion merger announced in December between CVS Health Corp (N:CVS) and health insurer Aetna Inc (N:AET). Shareholders from those companies approved the CVS-Aetna tie-up in March, but they are still awaiting antitrust approval.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.