Anthem - Cigna

Deal Details: 

On July 24, 2015, Anthem, Inc. (NYSE: ANTM) and Cigna Corporation (NYSE: CI) announced that they have entered into a definitive agreement whereby Anthem will acquire all outstanding shares of Cigna in a cash and stock transaction and Cigna shareholders will receive $103.40 in cash and 0.5152 Anthem common shares for each Cigna common share. The total per share consideration equates to approximately $188.00 for each Cigna share based on Anthem's closing share price on May 28, 2015, valuing the transaction at $54.2 billion on an enterprise basis

Premium: 

38.4% premium to Cigna’s unaffected stock price of $135.87 on May 28, 2015 ie. ~$13.5 bn
40.5% premium to Cigna’s 10-day trading average stock price of $133.82 as of May 28, 2015 (~$14bn)

Announced synergies: 

$2000 million in annual run-rate synergies by second year from following sources - 
Administrative structure • Operational efficiencies • Network efficiencies and medical management • Cross leverage best in class capabilities • Leverage Cigna Specialty capabilities across Anthem • Unique capabilities to serve growing Dual Eligible population • Potential PBM synergies have not been included

One-time implementation costs are estimated to be ~$600 million spread over two years

My Bytes:

• Announced synergies translate to about 6.4 % of all operating expense of Cigna and 19.5 of SG&A expenses, based on financials for FY 2014
• Of the combined costs of Cigna and Anthem as reported in 2014, announced synergies translate to about 2.0% of all operating expenses and 9.1% of SG&A expenses
• NPV of synergies is ~$10-12bn, slightly lesser than the premium paid, however, the synergies estimate does not include synergies from benefits management

References:
Anthem -Cigna - Investor Presentation
Anthem - Cigna - Press announcement
Cigna Press announcement