Cigna to Acquire HealthSpring for $3.8 Billion

The Financial Times is reporting this morning that Cigna Corporation (NYSE:CI) has announced a deal to acquire HealthSpring for $3.8 billion in cash.  Cigna will pay $55 per share for HealthSpring, a premium of roughly 37% to HealthSpring’s closing price on Friday.  Cigna plans to finance the acquisition by diluting its current shareholders.  It will issue new stock and debt to raise the money.

Cigna’s President and CEO, David M. Cordani, is quoted in its press release as saying “HealthSpring is a great fit with Cigna’s growth plans to expand into the Seniors and Medicare segment through a premier business and trusted brand name.  Our two companies share a common strategic vision and philosophy that we create customer value by partnering with health care professionals, and use information and incentives to deliver high-quality differentiated programs.”

It is unclear how the acquisition benefits Cigna’s current shareholders.  As of the most recent quarter (6/30/11) the company holds current assets of $1.4 billion against current liabilities of $330 million.  It is unclear how Cigna’s intent to raise new capital will affect its capital structure.

Following is some information about the companies’ stock price performance.

  • Cigna Corporation (NYSE:CI): The shares recently traded at $44.37, down $0.33, or 0.78%, on the day.  The shares have traded in a 52-week range of $34.87 to $52.95 and its market capitalization is $11.98 billion.  About the company: CIGNA Corporation, through its subsidiaries, provides group life and health insurance, managed care products and services, retirement products and services, and individual financial services worldwide.  The Company also sells individual life and health insurance and annuity products in selected international locations.
  • HealthSpring, Inc. (NYSE:HS): The shares recently traded at $53.68, up $13.52, or $33.67%, on the day.  The shares have traded in a 52-week range of $24.34 to $53.80 and its market capitalization is $3.65 billion.  About the company: Healthspring, Inc. is a health maintenance organization.  The Company serves Medicare recipients with a comprehensive network of hospitals and physicians.

(Note: Selected financial data are sourced from Google Finance.  All data are assumed to be accurate.)

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