(Bloomberg) – Aetna Inc. agreed to buy Humana Inc., the second-largest provider of private Medicare insurance, for $37 billion in cash and stock to broaden its health care coverage.

The transaction values Humana at $230 a share based on Thursday’s closing price for Hartford, Conn.-based Aetna, the companies said in a statement Friday. That’s 23% above Louisville, Ky.-based Humana’s last close.

The acquisition is part of a merger frenzy as the five biggest U.S. health insurers look to get bigger. The law known as Obamacare spurred deals by introducing rules that push insurers to look for savings, and by creating millions of new customers. Humana’s 3.2 million Medicare Advantage members made it a target: it’s winning new business as more Americans turn 65 and become eligible for the health program for the elderly and its private insurer-run version.

“Medicare Advantage is a coveted space,” Michael Bernstein, a partner at Baird Capital’s U.S. private equity team who focuses on health care, said in an interview before the transaction was announced. “To develop a similar scale in Medicare would take a great deal of work and time, which would be bypassed by making that transaction happen.”

Terms of deal

Humana shareholders will receive $125 in cash and 0.8375 of an Aetna share for each of Humana’s. The companies expect the deal to close in the second half of 2016. Aetna Chief Executive Officer Mark Bertolini will be chairman and CEO of the combined company.

The transaction values Humana at about 10 times earnings before interest, tax, depreciation and amortization, according to data compiled by Bloomberg. That’s below the median valuation of 11.4 times for similar deals, the data show.

The deal is also poised to be the biggest ever in the health-insurance industry, according to data compiled by Bloomberg.

Still, it may soon be surpassed. Cigna Corp. last month rejected a $47 billion bid from Anthem Inc., saying the offer wasn’t in the best interests of shareholders and Anthem executives weren’t fit to lead a merged insurance giant. And UnitedHealth Group Inc., the biggest insurer, has considered whether to pursue deals with Cigna or Aetna, the Wall Street Journal reported last month.

More transactions

Centene Corp. said Thursday it agreed to buy Health Net Inc. for about $6.3 billion in a deal that creates the biggest private administrator of Medicaid, the federally funded health program for the poor.

Some of the consolidation has been fueled by the Patient Protection and Affordable Care Act. The 2010 overhaul of the U.S. health-care system provides subsidies to help people afford coverage.

Also see: Biggest health insurers to get even bigger under ACA

A Supreme Court ruling upholding those subsidies for more than 6 million people helped clear the path to dealmaking. The 6-3 decision on June 25 in the King v. Burwell case said the U.S. can continue to give people money to help them buy coverage on the federal healthcare.gov website.

Medicare membership is projected to rise to 68.4 million in 2023, up 26% from this year, according to the Centers for Medicare & Medicaid Services. Humana covers more than 14 million people through commercial, Medicare and Medicaid plans.

Citigroup Inc. and Lazard Ltd. provided financial advice to Aetna, while Davis Polk & Wardwell LLP is acting as legal adviser. Goldman Sachs Group Inc. gave financial advice to Humana and Fried, Frank, Harris, Shriver & Jacobson LLP is its legal adviser.

Additional reporting by Ryan Sachetta and Zachary Tracer

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