Cigna has announced the sale of its Medicare Advantage, Cigna Supplemental Benefits, Medicare Part D and CareAllies businesses to Health Care Service Corporation (HCSC) for a total transaction value of approximately $3.7 billion.
HCSC is the United States’ largest customer-owned health insurer with nearly 17.5 million members in its health plans in Illinois, Montana, New Mexico, Oklahoma and Texas. HCSC was formerly known as Hospital Service Corporation and changed its name to Health Care Service Corporation in 1975.
Centerview Partners LLC is acting as a financial advisor to Cigna. Morgan Stanley & Co. LLC provided additional financial advice. Wachtell, Lipton, Rosen & Katz is serving as corporate legal counsel, and Rule Garza Howley LLP, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Sidley Austin LLP are serving as regulatory counsel.
As part of the transaction, Cigna and HCSC have agreed to enter into a four-year services agreement under which Evernorth Health Services, a subsidiary of Cigna, will continue to provide pharmacy benefit services to the Medicare businesses, effective on closing of the transaction.
The transaction is expected to be accretive to Cigna’s adjusted earnings per share in 2025. Following the completion of the sale, Cigna will strategically use proceeds from the transaction in alignment with its capital deployment priorities, with the majority of the proceeds allocated to share repurchases. The transaction is expected to close in the first quarter of 2025, subject to receipt of applicable regulatory approvals and other customary closing conditions. There is no financing condition.
According to data captured in the LevinPro HC database, this acquisition marks the sixth Managed Care transaction of the year. In 2023, 31 Managed Care transactions were reported. This transaction also marks HCSC’s first transaction since it acquired Lake Forest, Illinois-based Trustmark Health Benefits for an undisclosed price.
