Cigna Corporation (NYSE:CI) has agreed to acquire all outstanding shares of HealthSpring, Inc. (NYSE:HS) for $55 per share for a total transaction value of approximately $3.8 billion, as part of its growth strategy to expand its presence in the seniors and Medicare segment.
This represents a 37% premium over HealthSpring’s closing stock price on Friday, Oct. 21. The acquisition is expected to be accretive to Cigna earnings per share in the first full year of operations, and has been approved by the boards of directors of both companies, although it is subject to required regulatory approvals and customary closing conditions.
The transaction is expected to close during the first half of 2012, and is not subject to a financing condition.
“HealthSpring is a great fit with Cigna’s growth plans to expand into the Seniors and Medicare segment through a premier business and trusted brand name,” said David M. Cordani, President and Chief Executive Officer, in a statement.
The combination provides Cigna with several significant opportunities to further expand upon its successful growth strategy, says the corporation, through scaled presence in the seniors segment with a highly differentiated Medicare Advantage business that currently has approximately 340,000 members in 11 states plus Washington, D.C..
Additionally, HealthSpring is already established as a quality provider of senior care, and Cigna can further expand HealthSpring’s customer base by leveraging current client relationships, and expanding into new geographic regions.
Cigna has obtained a commitment for bridge financing provided by Morgan Stanley that, combined with available liquidity, is sufficient to fund the acquisition. The corporation intends to raise approximately 20% of the purchase price through the issuance of new equity, with the balance funded from additional debt issuance and internal cash resources, and this permanent financing structure is expected to enable Cigna to maintain its financial flexibility, a strong balance sheet and its current credit ratings.
Cigna’s financial adviser is Morgan Stanley and its legal adviser is Davis Polk. HealthSpring’s acting financial advisor is Goldman, Sachs & Co., and its legal advisers are Skadden, Arps, Slate, Meagher & Flom, LLP and Bass, Berry & Sims PLC.
Written by Alyssa Gerace