(Bloomberg) -- Cigna Group is planning a “significant” increase of its stock buyback, committing an additional $10 billion to the plan after calling off its pursuit of Humana Inc.
The buyback increases Cigna’s total share repurchase authority to $11.3 billion, the Bloomfield, Connecticut-based company said Sunday.
Cigna is also abandoning discussions with Humana, according to people with knowledge of the matter who asked not to be identified. While the two sides believed a merger made strategic sense and thought it could clear regulatory hurdles, they couldn’t agree on the price, the people said.
A combination would have created a health insurance behemoth with a combined market value of about $135 billion, even after share price declines for both companies in the past month. The bearish market response signaled that investors thought a combination might have been worth less than the sum of its parts.
The two companies had been discussing a cash-and-stock deal but the timing and structure were unclear, Bloomberg News previously reported.
The gap between how much Cigna wanted to pay and what Humana was expecting was too wide and Cigna’s stock price decline made it even harder to close that gap, one of the people said. And while the two sides felt their odds of clearing antitrust concerns were good, some investors worried about a protracted review process and a possible court battle in an election year, the person said.
A representative for Humana declined to comment. The Wall Street Journal reported earlier Sunday that Cigna was walking away from the merger talks.
Cigna expects to repurchase at least $5 billion of common stock by the end of the first half of 2024, according to its statement. A portion of the repurchase will take place through an accelerated program conducted in the first quarter.
“We believe Cigna’s shares are significantly undervalued and repurchases represent a value-enhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes,” said David Cordani, Cigna’s chairman and chief executive officer. “As we look at the broader landscape and the strategic opportunities before us, we will remain financially disciplined with a clear focus on executing against our strategy, delivering value for our shareholders, and investing in our future.
While Cigna didn’t comment publicly on Humana, Cordani said in the statement that the company will “consider bolt-on acquisitions aligned with our strategy, as well as value-enhancing divestitures.”
Cigna’s plan to divest its Medicare Advantage business is still going ahead and could be announced within two weeks, one of the people said. That business has drawn interest from potential buyers including Health Care Service Corp., Bloomberg News has reported.
--With assistance from John Tozzi.
(Updates with details of negotiations in sixth paragraph)
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