Dive Brief:
- The Department of Justice on Monday said it will not challenge Cigna's $67 billion acquisition of Express Scripts because the deal is "unlikely to result in harm to competition or consumers."
- "We are pleased that the Department of Justice has cleared our transaction and that we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company," Cigna CEO David Cordani said in a statement.
- While the federal antitrust division will not seek to block the merger, the deal is still subject to state regulators and various departments of insurance.
Dive Insight:
The clearance from DOJ means Cigna is one step closer to closing its acquisition of Express Scripts, which puts Cigna's medical benefit services and Express Scripts expertise in pharmacy benefit management under one roof. Analysts have said this is crucial as payers try to rein in spending on costly specialty drugs.
Regulators spent six months on the investigation, reviewed more than 2 million documents and interviewed more than 100 people from within the industry before reaching their conclusion, DOJ said.
Brian Tanquilut, an analyst with Jefferies, said DOJ's decision not to intervene is not surprising "given the lack of overlap between Cigna's business versus Express Scripts."
The deal, which has already secured shareholder approval, is expected to close at the end of the year.
Industry watchers now turn their eyes more squarely to the DOJ's verdict on the $69 billion proposed Aetna-CVS merger. Leerink analyst David Larsen is among those predicting a green light for that deal as well but he said overlap in Medicare Part D coverage could explain the longer approval process.
Cigna overcame a last-minute effort by activist investor Carl Icahn to nix the deal, warning fellow shareholders in an early August open letter that the deal was among the "worst acquisitions in corporate history."
Icahn backed down after major shareholder advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. came out in support of the deal.
On its first quarter earnings call with investors earlier this year, Cigna executives said they expect the deal to result in earnings per share increasing from $18 to between $20 and $21 by 2021 and a long-term annual growth rate of 6% to 8%. Cigna shareholders will own about 64% of the combined company and Express Scripts shareholders will own about 36%.