Sopa Images | Lightrocket | Getty Images
Shares of Cigna jumped the following Monday References that the healthcare giant has scrapped plans to buy the rival Humana due to disagreements over price, bringing an early end to one of the biggest deals of the decade.
Cigna late Sunday also announced its plans buy back $10 billion shares, bringing its total planned repurchases to $11.3 billion. The company said in a statement that it would consider smaller, “bolt-on” acquisitions in the near future, but did not confirm reports that it was abandoning its pursuit of Humana.
Cigna stock closed more than 16% higher on Monday, while Humana stock closed 1% lower.
Representatives for Cigna and Humana did not immediately respond to CNBC’s requests for comment on the canceled merger, which was the first mentionted from the Wall Street Journal on Sunday.
Cigna and Humana have been unable to agree on price and other financial terms of the deal, which would have created a health care group worth more than $140 billion, sources familiar with the matter told the Journal.
This association would likely have attracted harsh antitrust scrutiny. The companies’ shares fell sharply in late November after the newspaper first reported they were discussing a merger.
But Cigna continues to believe in the merits of a relationship with Humana, the Journal reported Sunday. The combined company would have focused on improving access to care and reducing costs for consumers, sources told the Journal.
Jefferies analyst David Windley upgraded Cigna shares to buy from hold in a Sunday research note, saying the abandoned Humana deal is a “short-term win” for Cigna investors.
He added that “exploiting a negative reaction to trading reports” by announcing the share buyback plan on Sunday is “music” to the “sensitive ears of Cigna shareholders.”
Windley noted that Cigna shares have fallen sharply since Nov. 6, when reports emerged about the company exploring a sale of the Medicare Advantage business, which administers government health insurance for people age 65 and older.
Investors interpreted that potential sale as Humana’s “step to reduce its antitrust exposure in a takeover deal,” Windley said.
Don’t miss these stories from CNBC PRO: