Cigna may seek alternative M&A target after failed $48bn Anthem deal

US health insurer Anthem is appealing against the Department of Justice’s decision to block the proposed merger with its rival Cigna but analysts see little chance of success. Instead, Cigna may look for other potential acquisitions to grow.

US District Judge Amy Berman Jackson had ruled that the effect of the tie-up between Anthem and Cigna could substantially reduce competition in what she called an already highly concentrated market.

“We view the likelihood of success in an appeal as low,” CreditSights analysts wrote in a February 12 report.

Instead, Cigna may turn to other acquisition targets such as Humana, the analysts suggested.

Cigna management has stated on a number of occasions that it is willing to lever up the balance sheet and believes it can readily make available up to $14 billion for M&A purposes.

Cigna’s CEO, David Cordani, has said that he is interested in increasing Cigna’s global footprint, further its US seniors capability and its retail capabilities, the analysts wrote.

Beyond seeking growth in government lines of business, adding medical members better enables a health insurer to extract deeper discounts from both health care providers and pharmaceutical companies, the analysts noted.

Potential M&A targets include Centene, Wellcare, Molina and Humana, the analysts suggested.

Cigna has already made two bids on Humana shortly before it agreed to the Anthem deal, according to the Department of Justice.

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