Humana shares jumped more than 8 percent in early-morning trading Monday following last week’s reports that the Louisville-based insurer is in early-stage discussions with retail giant Walmart about a merger. Walmart’s shares fell.
The insurer’s shares had spiked above $290, up nearly $22, or more than 8 percent in the first hour of trading, before dipping slightly. Around 10:30, Humana’s shares traded for $285, up 6 percent. At the time, the S&P 500 was down about 1 percent, while Walmart’s shares had fallen nearly 3 percent, to about $86.50.
The Wall Street Journal had cited unnamed sources last week in a report that the two companies were discussing a possible merger.
Such a deal would fundamentally alter both the insurance and retail industries and comes on the heels of a string of announcements in which health insurance giants are merging with partners in related industries.
Shareholders of insurer Aetna and drugstore company CVS recently approved a $69 billion merger, while insurer Cigna and pharmacy benefits manager Express Scripts said last month that they planned to merge in a $67 billion deal. The WSJ report surfaced just hours before voting began on a merger involving Humana and Kindred Healthcare, which the parties had announced in December.
Humana could not be reached to comment on the latest reports, which emphasized that the talks were preliminary and involved a possible partnership other than a merger. Humana and Walmart already are working together on a Medicare prescription plan that provides customers with drug discounts.
An industry analyst had suggested in November that Humana was a takeover target of companies including Cigna and Walmart. Humana at the time had taken steps such as agreeing to pay its executives millions of dollars in a “change of control” event.
Health care experts had told Insider shortly after the Humana/Kindred announcement, that such deals involving represented an escalation in the “arms race” between insurers and health care providers.
Before the latest wave of merger announcements, both insurers had been merging with other insurers and health care providers had been joining forces with other providers as both sought to leverage their greater heft in reimbursement negotiations. However, federal regulators last year stopped the planned unions between Humana and Aetna as well as Cigna and Anthem on antitrust grounds.
When horizontal mergers — with companies in the same industry — are not available, vertical mergers — with partners in a related industry — are the “natural next step,” an Indiana University professor had told Insider.