Aetna To Buy Coventry for $5.7B, Expand Work in Medicare, Medicaid

On Monday, Aetna announced plans to buy Coventry Health Care for $5.7 billion in cash and stock, Reuters reports (Venkatesan, Reuters, 8/20).

As part of the deal, Aetna will pay about $42.08 per share, including $27.30 in cash and a portion of its stock. The figure is about 20% higher than Coventry's closing price on Friday, according to the AP/San Francisco Chronicle.

The Hartford, Conn.-based company said the deal would help it push further into government-financed programs like Medicare and Medicaid. Specifically, it will expand Aetna's Medicare Advantage and Medicare prescription drug business.

In addition, it will grow Aetna's Medicaid business ahead of the Medicaid expansion under the federal health reform law in 2014 (Murphy, AP/San Francisco Chronicle, 8/20).

Currently, 23% of Aetna's revenue from government business. Aetna expects that figure to grow to more than 30% with its purchase of Coventry (Terlep/Das, Wall Street Journal, 8/20).

Meanwhile, Aetna said the purchase would lead to around $400 million in annual costs savings by 2015 (De La Merced, "DealBook," New York Times, 8/20).

Aetna said the deal is still subject to regulatory review and approval from Coventry shareholders, but it is expected to close in mid-2013 (AP/San Francisco Chronicle, 8/20).