Managed-care company Cigna Corp. said Monday it buy fellow health insurer HealthSpring Inc. in a $3.8 billion deal that would boost Cigna's Medicare Advantage business.
The Bloomfield, Conn., company will pay $55 per share in cash for HealthSpring, which is based in Nashville, Tenn. That represents a 37 percent premium over the stock's Friday closing price of $40.16.
HealthSpring shares soared 33 percent, or $13.34, to $53.50 in premarket trading, while Cigna stock was up more than 3 percent, or $1.55, to $46.25.
Cigna said the boards of directors for both companies have approved the deal, and it is expected to close in the first half of 2012.
Medicare Advantage plans are privately run versions of the government's Medicare program. They are subsidized by the government and offer basic Medicare coverage topped with extras or premiums lower than standard Medicare rates.
HealthSpring has about 340,000 Medicare Advantage customers in 11 states, including Florida, New Jersey, Pennsylvania and Texas. It also has a Medicare prescription drug business with more than 800,000 customers.
Cigna said it has a commitment from Morgan Stanley for bridge financing, and that plus available liquidity will fund the acquisitions.
Cigna is the fourth-largest commercial health insurer based on enrollment, trailing WellPoint Inc., UnitedHealth Group Inc. and Aetna Inc. It operates health care, group disability and life segments in the U.S. The insurer also has a growing international segment that sells individual insurance in several countries and operates an expatriate business that covers people living outside their home countries.
Big insurers like Cigna have reported strong results in recent quarters. Analysts have speculated that companies would look to make acquisitions with the cash they were piling up.
Cigna said Monday it will move up its third-quarter earnings report to Friday from Nov. 3.
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