Cigna and Humana Merger Talks Resume: What Investors Need to Know

One of this week’s top news stories has been the revival in merger talks between Cigna Group (NYSE: CI) and Humana (NYSE: HUM), two healthcare giants whose merger would significantly affect the industry (and perhaps beyond). While it might be early to start planning for what exactly might happen with it, it’s currently vital to understand the chances it would occur.

First, a little background information:

It’s been a rough year for managed-care stocks in light of Medicare payment news earlier this year. Cigna has done better than most of its contemporaries, putting it in a better place for a merger. Humana did not fare so well (see below) this year to date, losing 43.74% of its value as of this writing.

Chart courtesy TradingView 

A few more considerations:

• This isn’t the first time merger talks have been held. Cigna has talked to Humana about a potential merger before, with the price being too high for Humana at the time. This might have changed.
• By all accounts, the talks are in their early stages. We don’t know how a deal might look, when it would occur, or other factors.
• Both being major healthcare providers, a merger would bring about serious antitrust concerns and almost certainly bring on a review from the FTC and Department of Justice. Such reviews would take time and could quickly derail a merger.

There is also another wild card as to whether this merger takes place at all: the upcoming election. If Donald Trump wins, talks will likely move forward, and a potential merger will likely go through with less resistance. If Kamala Harris wins, that’s not so likely. And anyone who tells you who will win the election with absolute certainty at this point is either a party PR rep, someone advertising their polling methods, or someone who bet on one of the candidates.

So we have rumors and can acknowledge some talks. How have they affected stock prices and analyst predictions for the two companies?

CI has dropped recently, totaling about -11% over the last month.

Chart courtesy TradingView 

Humana is faring slightly better, with a small incline in the last week, but this is coming off of a significantly worse year, as discussed before.

As for forecasts? Right now, CI is currying more analyst favor. It currently enjoys a Strong Buy consensus (see the ratings here), as opposed to HUM, which has a Hold consensus (see the ratings here). 

What should investors do? They may want to wait and see, given the number of undetermined factors involved, unless they're willing to take on a lot of risk. There are many things that could derail a merger, and we don’t even know what a merger would look like. Owners of CI and Humana will want to review their positions and adjust appropriately based on their comfort with the uncertain landscape.

The Takeaway: There are significant gains to be had for investors who make the right call here regarding CI and HUM, but there is a great deal that’s still unknown about a potential merger. The deal will heavily hinge on the results of the currently heated election.

To get further information on these stocks and the potential situation, you’ll want some help unless you want to refresh the news every five minutes. WallStreetZen Premium allows you to get updates on the stocks on your unlimited watchlist, as well as access to our set of analyst ratings and opinions, so you can make smarter investing decisions.

Want to get in touch? Email us at news@wallstreetzen.com.