Acquisition of Express Scripts
On March 7, 2018, Cigna (CI) announced that it has entered into a definitive agreement to acquire Express Scripts (ESRX) for a total consideration of $67 billion, which includes $15 billion worth of the latter’s debt. The cash and stock transaction has been structured so every Express Script common share will be purchased for $48.75 in cash and 0.24 of Cigna’s common shares. The consideration offered can be categorized as 50% cash and 50% stock.
Cigna has offered Express Scripts’ shareholders a premium of ~31% over Express Scripts’ closing price as of March 7, 2018. Subsequent to the completion of the acquisition on these terms, ~64% of the equity of the combined company will rest with Cigna’s shareholders, while the remaining 36% will be with Express Scripts’ shareholders.
Financing and deal closure timeline
The financing terms of this transaction are expected to result in a pro forma debt-to-capitalization ratio of ~49%. However, within 18 to 24 months of the close of the deal, Cigna anticipates that ratio to revert back to a level in the range of 30%–39%. The deal is expected to be completed by the end of 2018, subject to regulatory approvals as well as the conclusion of the waiting period required by the Antitrust Improvements Act of 1976. The merger transaction will also require the approval of shareholders from both Cigna and Express Scripts.
The successful completion of the Cigna–Express Scripts deal could enable the combined company to compete effectively with UnitedHealth Group (UNH), which has its own pharmacy benefits manager, OptumRx, and Aetna (AET) which is being acquired by CVS Health.
In the next part of this series, we’ll look at the synergies of a Cigna–Express Scripts transaction.