Regulators would never approve it
Jim Cramer urged Humana (HUM) not to pursue a merger with rival health insurer Cigna (CI), questioning the merits of a potential business combination and the likelihood of it passing U.S. antitrust review. Cigna and Humana could reach an agreement on a stock-and-cash transaction by the end of the year, The Wall Street Journal reported Wednesday. The stocks of both companies tumbled after the Journal post. Cigna sank 8% on Wednesday to $262.87 per share. Humana fell 5.5% to $482.41 per share. Humana shares were down slightly Thursday, while Cigna rose modestly. Before Wednesday’s stock slide, Cigna’s market value stood at $84 billion. Humana was valued at around $63 billion. “This is one of the most ill-advised deals I’ve ever heard,” Jim said Thursday. “It’s never going to be approved” by U.S. regulators and will distract from Humana’s focus on its strong Medicare Advantage business, he said. That’s a major reason why we took a stake in the company in April 2022 and a key growth area for the health insurance industry overall. In contrast to Humana, Cigna’s primary focus is the commercial insurance market. Cigna also operates pharmacy benefit manager Express Scripts, which it bought for $54 billion in 2018 . Pharmacy benefit managers act as a middleman between drugmakers and insurance providers. Humana declined to comment on the Journal’s report. Cigna reportedly had an interest in acquiring Humana in 2015. Rival insurer Aetna eventually reached a $34 billion deal for Humana, but it was later blocked by a U.S. judge on competition concerns in January 2017 . Aetna has since been acquired by CVS Health (CVS). In 2017, a U.S. judge also blocked the company now known as Elevance Health ‘s (ELV) blockbuster $54 billion bid for Cigna. Anthem renamed itself Elevance last year. President Joe Biden, who took office in 2021, has adopted a more skeptical approach toward mergers and acquisitions compared to his predecessors. Biden appointed fierce critic of corporate consolidation Lina Khan to run the Federal Trade Commission, which shares U.S. antitrust enforcement with the Justice Department. On Thursday, Jim acknowledged he has been a sharp critic of Khan’s FTC leadership, but this time around he said he’d welcome a challenge to a Cigna-Humana combination “I hope [Khan] shuts this thing down in a nanosecond,” Jim said. (Jim Cramer’s Charitable Trust is long HUM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
The Humana headquarters office stands in Louisville, Kentucky.
Ty Wright | Bloomberg | Getty Images
Jim Cramer urged Humana (HUM) not to pursue a merger with rival health insurer Cigna (CI), questioning the merits of a potential business combination and the likelihood of it passing U.S. antitrust review.
