From Wal-Mart to Walgreens, Humana Could Have Its Pick of Suitors
ByTeresa Rivas Nov. 27, 2017 11:37 a.m. ET
Shares of Humana (HUM) are up more than 18% this year, but could go higher still if the company gets an attractive takeover offer.
From Wal-Mart to Walgreens, Humana Could Have Its Pick of Suitors
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Just before the Thanksgiving holiday, Humana filed a Change of Control 8-K, effective Jan. 1, 2018, with clauses on both cash compensation and benefits of its employees, including its CEO. Leerink's Ana Gupte writes that the filing shows that Humana is a possible takeout target after the Medicare Advantage Annual Enrollment Season.
Gupte reiterated an Outperform rating and $280 price target on Humana today, writing that if there is a deal, it will most likely be with Cigna (CI), which makes the most sense as an acquirer, and could log as much as 6% and 12% earnings per share accretion in year two and three, respectively, following a deal that values Humana at $280 a share.
More from the note:
This is higher than our published accretion estimates on June 13, 2017, given the outperformance of CI relative to HUM YTD. Further, at a deal price of $300 per HUM share, the merger would offer accretion at ~8% in Year 3 post close.
We expect CI would need to divest its legacy HS MA assets to satisfy anti-trust regulators, with a combination of acquirers including Wellcare (WCG), Anthem (ANTM) and Aetna (AET) the most likely purchasers based on HHI analysis. The Houston assets of legacy HS would likely need to be sold, however, to ease the WCG purchase, in light of its recent purchase of UAM.
That said, Cigna isn't the only company that could snap up Humana. Anthem could also make a play for Humana, although Gupte thinks this is less likely, and that even Wal-Mart (WMT) or Walgreen (WBA) are 'dark horse' buyers as the threat of Amazon (AMZN) entering the healthcare space could spur the retailers to want to own a managed care company like Humana.