No this is not an April Fools prank. Aetna announcedtoday it will acquire Coventry Healthcare. The transaction is is in cash and stock and is valued at $7.3 billion after accounting for aetna’s assumption of Coventry’s debt.
The deal will give considerable strength in a number of key secondary and tertiary markets particularly in the central Midwest. It also makes Aetna a major power in Part D, strengthens the company’s Medicaid position, and puts Aetna back into the workers comp business.
This last is rather interesting. While Coventry’s workers comp revenues have been pretty much flat for five quarters, it is a big cash generator. However Aerna recently shut down its workers comp business (consisting of a network marketed exclusively thru Coventry) and management of that unit was not interested in the sector.
I’d be surprised if Aetna doesn’t keep their new work comp unit operating; cash is precious as they prepare for a post-2014 world and David Young’s unit has shown itself very good at generating lots and lots of green.
It is quite clear many other operating and administrative operations will see layoffs. Aetna expects $400 million in synergies ie lower costs – and most of that will be in the form of staff reductions.
From the official press release…
Adds growing individual Medicare Advantage business
Substantially increases Medicaid footprint
Improves Aetna’s positioning and reach in Commercial businesses
Adds low-cost product set built on value-based provider networks
Expected to be modestly accretive to Operating EPS in 2013, $0.45 accretive in 2014 and $0.90 accretive in 2015, excluding transaction and integration costs
Aug
20
