AndreyPopov
Cigna (NYSE:CI) and Humana (NYSE:HUM) have reportedly scrapped plans to merge after being unable to agree on financial terms, including price.
Cigna will instead seek out bolt-on acquisitions and conduct a major stock buyback, according to The Wall Street Journal. The Journal first reported the companies were in merger talks late last month.
Investors failed to embrace the idea of a merger, with Cigna shares dropping 8% following news of an impending deal and trending lower since. Humana shares have also taken a significant hit.
The newspaper said Sunday that the proposed merger deal would have had Cigna acquiring Humana in a cash-and-stock deal with a “large” stock component.
In a statement released Sunday, Cigna said it plans to conduct an additional $10B incremental stock buyback, which would bring the total amount of its repurchase authority up to $11.3B. The company is looking at buying back at least $5B in common stock before the end of the first half of 2024, with a portion of the buyback to be conducted through an accelerated repurchase program in Q1 2024.
“We believe Cigna’s shares are significantly undervalued and repurchases represent represent a value-enhancing deployment of capital,” Cigna CEO and Chairman David Cordani said in the statement, which didn’t mention Humana.
Cordani added the company would also be looking at bolt-on acquisitions and “value-enhancing divestitures.”
Cigna also reaffirmed its previously issued outlook of 2023 consolidated adjusted income from operations EPS of at least $24.75, with a target of at least $28 per share for 2024.
(Updates with comments from Cigna.)
