Cigna (NYSE:CI) has ditched its plans to acquire Humana (NYSE:HUM), another huge health insurer. Instead, Cigna will buy back $10 billion of its own shares and carry out smaller M&A deals. In early trading, CI stock is jumping 16% on the news.
An acquisition of Humana by Cigna would have made Cigna one of the largest health insurers in the U.S.
Why the Deal Fell Through and More Information About Cigna’s Plans
Cigna and Humana could not determine a mutually satisfactory “price and other financial terms” for the acquisition, The Wall Street Journal reported, citing unnamed sources. Cigna would have provided both cash and stock in exchange for HUM “with a large stock component,” The Journal noted.
Cigna stated that it intends to buy back “at least $5 billion of (its own) stock between now and the end of the first half” of 2024.
The insurer plans to utilize a “majority of its discretionary cash flow for share repurchase in 2024,” it added.
CEO David M. Cordani noted that the firm would weigh “bolt-on acquisitions” and divestments of assets going forward.
CI Stock Was Upgraded on the News
Investment bank Jefferies responded to today’s news by raising its rating on the shares to “buy” from “hold.” The bank upgraded the stock based on valuation after CI fell 17% in the wake of reports about its intent to buy HUM.
Additionally, Jefferies raised its price target on CI stock to $341 from $335, citing the company’s upcoming share repurchases.
Even with today’s bump, CI stock is still down about 7% year-to-date and nearly 12% compared to last year.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
