Aetna Inc. (AET) has agreed to buy Coventry Health Care Inc. (CVH) for $5.7 billion in cash and stock, making itself a prominent player in the government-financed health care, the Wall Street Journal reported, quoting people familiar with the matter.
Aetna will pay $42.08 per share for Coventry. This is a premium of 20.4 percent to Coventry's closing price on Friday.
While 65 percent of the value will be paid in cash, 35 percent will be in the form of stock. The $42.08 per share offer is a combination of cash and 0.3885 share of Aetna for each Coventry share. Including assumption debt, the deal is valued at $7.3 billion.
The boards of both companies have approved the deal. The deal is expected to be announced on Monday, the report said.
The deal could help the company expand in the government-based health plans, which includes Medicare for the elderly and Medicaid for the poor. Under Obama's healthcare reform law, Medicaid is set to expand from 2014.
It is expected that the deal will increase Aetna's share of revenue from the government-based business to 30 percent from the current 23 percent. The acquisition is also expected to add to Aetna's earnings by around 45 cents per share in 2014 and 90 cents per share in 2015, according to the report.
AET settled lower by 0.3 percent on Friday at $38.04.
CVH gained 0.7 percent to close at $34.94.
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