Activist investor Carl Icahn said shareholders in Cigna Corp. should vote against the $54 billion takeover of pharmacy-benefits firm Express Scripts Holding Co. because the health insurer is “dramatically overpaying.”
“Cigna management is offering to pay an all-time high price for a company that, as a result of secular changes, is currently standing on very dangerous ground,” the billionaire investor wrote in an open letter to shareholders on Tuesday. “It’s a travesty to complete this deal.”
The insurer should pursue a multi-year partnership with an existing pharmacy-benefit manager such as Express Scripts instead of a takeover, and use its existing cash to buy back shares, according to Icahn, who said he owns 0.56 percent of Cigna shares. Cigna, a major provider of health insurance to companies, agreed in March to pay cash and stock for Express Scripts, which helps insurers and employers manage their prescription drug benefits. The goal was to streamline different parts of the health-care system by bringing them under one roof, saving money for clients of the combined firm.
“We strongly disagree with the idea that Cigna’s only route to offering a more integrated solution is to make a $60 billion leveraged bet on a company with as many challenges as Express Scripts,” Icahn wrote. Cigna’s stock could advance to become worth more than $250 a share “in a reasonable time frame,” while Express Scripts is currently worth less than $60 apiece, he argued.
Both Cigna and Express Scripts have said in recent days that they continue to support the transaction after people familiar said last week that Icahn had built a sizable stake in Cigna and plans to oppose the deal.
David Cordani, Cigna’s chief executive officer, said on a conference call Thursday that he continues to believe the takeover is in the best interest of shareholders. He also said it would immediately add to earnings and give Cigna “exceptional financial flexibility in a dynamic marketplace.”
Brian Henry, an Express Scripts spokesman, said Wednesday that the tie-up would “deliver significant value to shareholders and position our companies to continue transforming health care.”
–With assistance from Matthew Monks.
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