This is the largest deal that the industry in the company has ever experienced, as the rivals combine.
American health insurance company, Aetna Inc. has now announced that it will be purchasing its smaller competitor, as it enters into the largest industry deal that the country has ever seen.
The purchase is being made for approximately $37 billion in cash and stock, according to initial reports.
Once these two health insurance companies are joined, it will bring Aetna considerably closer to the second place position that is currently held by Anthem Inc. in the industry in terms of membership. This will also grow the Medicare Advantage business at Aetna by three times what it had previously been.
This health insurance deal is large enough that it is leaving all other deals far behind it in the industry.
That said, it must still face antitrust scrutiny before it is able to be completed. Before this deal, the next largest one that the industry had seen was for $28 billion, in which Chubb Corp was purchased by ACE Ltd, the Swiss property and casualty insurer. This latest acquisition also leaves the largest purchase made by Anthem behind, as that had been a $16.6 billion purchase of WellPoint back in 2004.
According to analysts, the mergers and acquisitions activity within the healthcare insurance sector had been held off until the Obamacare ruling was made by the Supreme Court. That determined that the subsidies for the health care reform would be upheld. Once the insurance companies were armed with that certainty, their M&A was given the opportunity to move forward.
This particular acquisition is a powerful one, because the larger a health insurance company is, the greater its ability to negotiate prices and enhance the doctor networks that it provides to its policyholders. In this light Anthem also recently offered to purchase Cigna Corp, which would make it the largest insurer in the United States, leaving UnitedHealth Group Inc. behind for that position. That said, recent reports in the media have also suggested that UnitedHealth has its eye on both the companies Cigna and Aetna.