(Reuters) – U.S. health insurer Cigna Corp (CI.N) said on Thursday it would buy pharmacy benefits manager Express Scripts Holding Co (ESRX.O) for about $54 billion, the latest deal in the sector aimed at cutting soaring healthcare costs.
Cigna’s offer consists of $48.75 in cash and 0.2434 shares of stock of the combined company for each Express Scripts share, amounting to $96.03 per share, representing a premium of nearly 31 percent to Express Scripts’ Wednesday closing price.
Express Scripts shares were up 18.5 percent at $87.00, while Cigna shares were down 5 percent at $184.50.
The transaction is valued at $67 billion, including about $15 billion in Express Scripts’ debt, the company said.
A deal between Cigna and Express Scripts follows the $69 billion merger of health insurer Aetna Inc (AET.N) and drugstore chain CVS Health Corp (CVS.N), reflecting a sector-wide move toward vertical consolidation, in which companies do not directly overlap operations.
The deals will allow companies to integrate pharmacy and medical claims and increase preventative services in clinics.
After the deal closes, Cigna shareholders will own about 64 percent of the combined company and Express Scripts shareholders the rest.
Cigna intends to fund the cash portion of the deal through a combination of cash on hand, Express Scripts debt and new debt issuance.
The insurer said it obtained fully committed debt financing from Morgan Stanley Senior Funding and The Bank of Tokyo-Mitsubishi UFJ Ltd for the deal.
Reporting by Ankur Banerjee in Bengaluru; Editing by Saumyadeb Chakrabarty