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U.S. health insurer Cigna has abandoned plans to merge with Humana, a blockbuster transaction that would have created a $140 billion insurance giant, according to people familiar with the matter.
The merger would have been the biggest deal of the year. Disagreements over financial arrangements, regulatory fears and falling stock prices after reports of the potential tie-up prompted Cigna’s decision to halt the plans, the people said.
Shareholders generally wanted their CEOs to make transformative deals, but not in this environment, according to a person familiar with the matter. The risk of a deal being blocked or left in limbo for years was too great and disruptive, she added.
The end of merger talks comes as Cigna prioritizes share buybacks. The insurer announced plans on Sunday to increase share buybacks by $10 billion. The Wall Street Journal first reported that Cigna’s plans to merge with Humana had ended.
Cigna and Humana did not immediately respond to requests for comment. Cigna CEO David Cordani said in a statement about his stock buyback program that the company remains “financially disciplined” and will “consider additional acquisitions aligned with our strategy.”
“We believe that Cigna shares are significantly undervalued and that buybacks represent an appreciating deployment of capital,” Cordani said.
Increasing pressure to reduce costs has led to consolidation efforts in the US healthcare industry in recent years, against a backdrop of stringent regulations. Earlier this year, CVS Health spent nearly $20 billion to acquire home health provider Signify Health and primary care network provider Oak Street Health.
Seventy percent of healthcare companies expect healthcare M&A activity to increase in 2024 after two relatively quiet years, according to a recent global survey from Jefferies. In its semi-annual report, PwC found that volumes for US healthcare services were 4 percent lower than in 2022.
The Cigna-Humana merger would have helped the insurers compete with larger rivals, including UnitedHealth Group, which generated $322 billion in revenue last year. Humana and Cigna together earned about $263 billion.
At both Cigna and Humana, previous deals have been blocked by federal courts. In 2017, Humana and Aetna called off merger plans after a federal judge ruled they were uncompetitive. Cigna and Anthem stopped talks weeks later after a similar federal ruling.