Aetna and Humana called off their $34 billion merger Tuesday. As Fred Katayama reports, this could put Humana in play.
Breakup on Valentine's Day: Aetna and Humana are scrapping their $34 billion marriage proposal. This follows a federal court ruling last month that charged the merger of the health insurers would stifle competition in the private Medicare coverage arena known as Medicare Advantage. Aetna CEO Mark Bertolini said, "... the current environment makes it too challenging to continue pursuing the transaction." That environment includes Anthem and Cigna, whose merger the Justice Department has also ruled against. But Anthem filed an appeal. Not so with Aetna. It will pay Humana a $1 billion breakup fee. It is also terminating its plan to sell some Medicare Advantage assets to Molina Healthcare. All this could make Humana a takeover target. Evercore ISI senior analyst Michael Newshel said, "We do not view the termination as a surprise. We reiterate Buys on both stocks with preference on Humana given the potential for an alternative takeout bid." The bidders could include Cigna and Anthem, he says, because their deal could also fall apart.