Aetna to Buy Coventry Health Care for $5.7 Billion

Aetna to Buy Coventry Health Care for $5.7 Billion


6:52 a.m. | Updated

Aetna announced on Monday that it would buy Coventry Health Care for about $5.7 billion in cash and stock, in a move by the insurer to push further into government-backed programs like Medicaid.

Under the terms of the deal, Aetna will pay about $42.08 a share, with nearly two-thirds of that amount expected to be in cash. The figure is about 20 percent above Coventry’s closing price on Friday.

Aetna, based in Hartford, said the deal would help it expand further into government-backed healthcare options, such as Medicare and Medicaid.

“Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies,” Aetna’s chief executive, Mark T. Bertolini, said in a statement.

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Aetna’s acquisition of Coventry is the latest deal in an industry that has been spurred to consolidation in part because of the Obama administration’s sweeping expansion of health care coverage in the country.

Last month, WellPoint agreed to buy Amerigroup for about $4.9 billion, in a deal that increased the big insurer’s presence in the markets for Medicare, for elderly patients, and Medicaid, for low-income patients.

Coventry, based in Bethesda, Md., offers a variety of insurance services, including government-financed programs. It earned $543.1 million last year on revenue of $12.2 billion.

The company’s shares have risen 17.5 percent in the last 12 months.

Aetna said it expected around $400 million of annual costs savings by 2015.

Goldman Sachs, UBS Investment Bank and the law firms Davis Polk & Wardwell and Jones Day advised Aetna on the deal, while Greenhill and Co and the law firms Wachtell, Lipton, Rosen & Katz, Bass, Berry & Sims and Crowell & Moring advised Coventry.