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Cigna Reiterates Support for Proposed USD 67bn Acquisition of Express Scripts
Thursday 09 August 2018

9 August 2018 - US-based health insurer Cigna Corp. (NYSE: CI) has written shareholders reiterating its support for the company's proposed acquisition of US-based pharmacy benefit managerExpress Scripts Holding Company (NASDAQ: ESRX), the company said.

In the letter, Cigna said it "strongly disagrees" with activist investor Carl Icahn, who has recently chosen to publicly object to the merger with Express Scripts. 

The Cigna board recommends that Cigna shareholders vote "FOR" the combination with Express Scripts.

Cigna said, "in the nearly five months since the merger announcement on March 8, 2018, neither Icahn nor his representatives have contacted Cigna or otherwise offered their views. Moreover, Icahn has disclosed that he only owns approximately one half of one percent of Cigna's stock and has a "substantial" short position in Express Scripts."

"Icahn does not represent the interests of Cigna shareholders. Icahn has made clear through his recent and limited entry into Cigna stock and "substantial" short position in Express Scripts that his motives are not aligned with Cigna's shareholders and he has no interest in creating value for shareholders (other than himself). It is not clear that Icahn even believes his own rhetoric and so-called concerns with the Express Scripts business model. In fact, nine of his businesses renewed their PBM contract with Express Scripts within the last year."

In March, Cigna and Express Scripts Holding entered into a definitive agreement whereby Cigna will acquire Express Scripts in a cash and stock transaction valued at approximately USD 67bn, including Cigna's assumption of approximately USD 15bn in Express Scripts debt.

The merger consideration will consist of USD 48.75 in cash and 0.2434 shares of stock of the combined company per Express Scripts share. The transaction was approved by the board of directors of each company.

Upon closing of the transaction, Cigna shareholders will own approximately 64% of the combined company and Express Scripts shareholders will own approximately 36%.

The consideration represents an approximately 31% premium to Express Scripts' closing price of USD73.42 on March 7, 2018.

Upon closing, the combined company will be led by David M. Cordani as president and CEO. Tim Wentworth will assume the role of president, Express Scripts. The combined company's board will be expanded to 13 directors, including four independent members of the Express Scripts board.

The combined company will be named Cigna. Cigna's headquarters in Bloomfield, Connecticut, will become the headquarters for the combined company, and Express Scripts will be headquartered in St. Louis, Missouri.

At closing, the combined company will make an incremental investment of USD 200m in its charitable foundation, to support the communities in which it operates, and with the continued focus on improving societal health.

Cigna intends to fund the cash portion of the transaction consideration through a combination of cash on hand, assumed Express Scripts debt and new debt issuance and Cigna has obtained fully committed debt financing from Morgan Stanley Senior Funding, Inc. and The Bank of Tokyo-Mitsubishi UFJ, Ltd. The transaction is not subject to a financing condition. Upon completion of the transaction, Cigna is expected to have debt of approximately USD 41.1bn.

Cigna expects to have a debt-to-capitalization ratio of approximately 49% following the acquisition, and aims to achieve a ratio in the 30's within 18 to 24 months after the transaction closes. Cigna expects to maintain its investment grade ratings.

The transaction, which is expected to be completed by December 31, 2018, is subject to the approval of Cigna and Express Scripts shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. Until the closing, Cigna and Express Scripts will continue to operate as independent companies.

Cigna Corp. (NYSE: CI) is a global health service company with operating subsidiaries including Connecticut General Life Insurance Company, Cigna Health and Life Insurance Company, Life Insurance company of North America and Cigna Life Insurance company of New York.

Express Scripts provides integrated pharmacy benefit management services, including network-pharmacy claims processing, home delivery pharmacy care, specialty pharmacy care, specialty benefit management, benefit-design consultation, drug utilisation review, formulary management, and medical and drug data analysis services.

Morgan Stanley and Co. LLC is acting as sole financial advisor and provided a fairness opinion to the Cigna board of directors, Wachtell, Lipton, Rosen and Katz is serving as legal counsel and Paul, Weiss, Rifkind, Wharton and Garrison LLP is serving as regulatory counsel to Cigna.
Centerview Partners LLC and Lazard Frères and Co. LLC are acting as financial advisors, Skadden, Arps, Slate, Meagher and Flom LLP is serving as legal counsel and Holland and Knight LLP is serving as regulatory counsel to Express Scripts.
Details
Date Published: 09/08/2018
Target: Express Scripts
Country: USA
Deal Size: 67bn (USD)
Sector: Healthcare
Type: Corporate acquisition
Financing: Cash and Stock
Status: Agreed
Vendor:
Buyer: Cigna Corp
Buyer Advisor: Morgan Stanley and Co , Wachtell, Lipton, Rosen and Katz , Paul, Weiss, Rifkind, Wharton and Garrison
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