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Cigna/Anthem Merger: What You Need To Know


Is the CI – ANTM merger still on in light of the new tax laws?

The CI and ANTM merger is quite different from that of the PFE and AGN merger.

I give my suggestion for playing the merger.

After the recent "deal breaker" of new tax laws clearly targeting the inverted Pfizer (NYSE:PFE)/Allergan (NYSE:AGN) merger, I was asked my opinion on whether the Cigna (NYSE:CI)/Anthem (NYSE:ANTM) merger is still on and, if so, how to play it. In this article, I answer both these questions.

Let's start with the most pertinent question: Is the CI/ANTM merger still on, in light of the new tax laws?

The simple answer is yes. The PFE-AGN merger and the CI-ANTM mergers are fundamentally different. The former was an attempt to save on taxes by moving the combined company out of the United States. The latter is to combine market share within the US and should not draw the attention of US tax policymakers.

On the other hand, in the case of CI and ANTM, the biggest barrier is the consumer advocate, who fears the combined company will place higher premiums on health care. CI and ANTM, however, have stated that the premiums of the combined company will be lower due to the increased efficiencies in the combined company. In this case, CI and ANTM merely need to show that their combined leverage can reduce premiums to dispel naysayers.

In Whose Best Interests?

Anti-monopoly laws might have some say here, as well. The merged company would become the largest insurance company in the United States. Of course, overcoming this issue is the same as overcoming the previous issue: The companies must show that the merger is in the insured's best interests.

The truth is that both sides have strong arguments. On the one...