Thursday, July 23, 2015

Cigna 7-23-2015 Update

Cigna started the month at a price of  $162.40, and is currently trading at $154.36, showing a 5% decrease; the wide shift in stock price is due to the rumors circulating around Anthem buying out Cigna.  The most recent report published by the Wall Street Journal is reporting that their competitor Anthem will acquire Cigna for $48 billion; this equates to about $188 a share, since purchasing the stock at a shade over $120, this would represent 56% worth of upside.  The main strategy behind the acquisition for Anthem is to attempt to consolidate the market; with consolidation these corporations are able to penetrate new markets, and absorb a larger customer base.  Cigna had previously rejected a $47.5 billion offer from Anthem; this would price the company at $184 a share.  Anthem and Cigna are now the second and fifth largest health insures by revenue.  Cigna specializes in administration of healthcare coverage for large employers, while Anthem administers the blue cross and blue shield plans 14 different states.  The analysis believes that the combine customer base, along with the different health care plans will bode well and that the acquisition will reflect positively on revenues.  There are estimates that predict that the combination of companies will create $2 billion in annual synergies.  The deal has still yet to be complete, and they must overcome the hurdle of antitrust laws, which may be tricky considering the whirlwind of corporate acquisitions within the healthcare industry in the past year.  Cigna reports quarterly earnings on Thursday July 30th.

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