BLOOMFIELD, Conn. ― Health insurer Cigna Corp. will buy HealthSpring Inc. for about $3.8 billion to jump-start its business selling Medicare plans for the elderly.
The move represents a significant diversification for Cigna, which has largely focused its U.S. health plans on businesses. The company said it would issue new equity to cover about 20 percent of the purchase price, with the rest funded by additional debt and cash.
Cigna plans to buy HealthSpring for $55 a share, a 37 percent premium over the closing price on Friday, the companies said in a statement on Monday.
“We view it as both a growth opportunity as well as a great marketplace to further differentiate,” Cigna Chief Executive Officer David Cordani told reporters on a conference call.
Asked whether the deal would face regulatory hurdles, Cordani said it was a “segment expansion” into an area where Cigna is not a large player and therefore should be manageable. The companies plan to close the transaction in the first half of 2012.
“It’s not a scale-based consolidation,” Cordani said. “We’re obviously aware of the environment around scale-based consolidation.”
Cigna expects the deal to add to its earnings per share in the first full year of operations. Separately, the insurer raised its forecast for 2011 adjusted earnings to a range of $5.05 to $5.30 per share, from a previous view of $4.95 to $5.25.
HealthSpring shares jumped 33 percent to $53.46 in premarket trading, while Cigna rose 2.9 percent to $46.