Cigna
stock was on pace for its largest percentage increase since 2009 following a Wall Street Journal report that said the health services company was calling off a potential merger with
Humana.
The Journal reported Sunday that Cigna has backed away from an effort to buy
Humana
because both companies couldn’t come to an agreement on financial terms. The newspaper reported at the end of November that the companies were in talks about a merger.
Humana declined to comment to Barron’s, while Cigna didn’t immediately respond.
Cigna investors weren’t pleased with the idea of buying Humana. Cigna shares fell 8.1% the day the Journal originally reported on the potential merger.
Moves in the two health insurers following the report that the deal had fallen through make the same point. Cigna shares jumped 15% to $296.82, making the stock the best performer in the
S&P 500.
Humana stock was down 1.6% to $473.94.
RBC Capital Markets analyst Ben Hendrix said in a research note early Monday that he expected Cigna stock to rise following the Journal report, given that the deal “seemed widely unpopular among investors based on feedback we’ve received due to dilution potential for Cigna shareholders and likelihood of regulatory/legal challenges.”
Hendrix rates Cigna as Sector Perform with a $327 price target. He has Humana at Outperform with a target of $599 for the price.
Jefferies analyst David Windley was also optimistic. Windley upgraded shares of Cigna to Buy from Hold and increased his target for the price to $341 from $335 on Sunday.
“Walking away from HUM deal is a short-term win for CI investors,” Windley said in the research note. “…This upgrade is simple. Before reports of CI shopping its MA book, shares stood at ~$310. Since then, the stock is down (16.5%) with no fundamental change.”
Write to Angela Palumbo at angela.palumbo@dowjones.com
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