Cigna Ditches Humana Merger, Changes Strategy to $10B Stock BuyBack

The Cigna Group has ended its bid to acquire its rival Humana Inc., an American health insurance company. It has officially dropped its merger attempt and instead opted to buy back $10 billion worth of shares.

The Cigna Group is now planning a buyback strategy after calling off its quest for the Humana merger. According to Reuters, the company decided to withdraw from the negotiation after the parties failed to reach an agreement regarding the price.

End of Potential for Multibillion Company Value After Failed Consolidation

The successful merger of the Cigna Group and Humana would have formed a huge company that is valued at more than $140 billion. Then again, the combination may also face intense antitrust scrutiny.

Cigna or Humana will no longer face this issue since the former has already called off the consolidation. It was revealed that the companies could start the negotiation six years after the regulators shut off mega-deals that would have combined the health insurance sector in the United States.

Merger Talks Officially Draws to a Close and Buyback Plans

The acquisition deal between Cigna and Humana did not agree on the price, and this ultimately put an end to the negotiations. But still, sources from Cigna said that despite the failed deal, there is still a chance that the companies may proceed with a partnership in the future.

Currently, Cigna's new plan is to do an additional $10 billion buyback of shares. This will bring the total of its stock repurchases to $11.3 billion.

"We believe Cigna's shares are significantly undervalued and repurchases represent a value-enhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes," The Cigna Group's chairman and chief executive officer, David M. Cordani, said in a press release. "As we look at the broader landscape and the strategic opportunities before us, we will remain financially disciplined with a clear focus on executing against our strategy, delivering value for our shareholders, and investing in our future. In light of the current environment, we will consider bolt-on acquisitions aligned with our strategy, as well as value-enhancing divestitures."

The CEO went on to add that with their 10 years of successful and consistent execution that resulted in EPS growth, they "are confident in the ongoing growth and strength of Cigna's businesses and expect to carry significant momentum forward into 2024. This conviction reinforces the confidence we have in achieving our long-term annual adjusted EPS growth target of 10-13% while maintaining an attractive dividend."

Photo by: The Cigna Group Press Release