Cigna shares jump on abandoned Humana buyout, buyback plans

Shares of Cigna jumped Monday following reports that the health-care giant has scrapped its plans to purchase rival Humana resulting from disagreements on price, putting an early end to what would have been one in all the biggest deals of the last decade.

Cigna late Sunday also announced plans to buy back $10 billion value of shares, bringing its total planned repurchases to $11.3 billion. The corporate said in a release that it’s going to consider smaller, “bolt-on” acquisitions within the near term, but didn’t confirm the reports about its abandoned pursuit of Humana.

Cigna’s stock closed greater than 16% higher Monday, while shares of Humana closed 1% lower.  

Spokespeople for Cigna and Humana didn’t immediately reply to CNBC’s requests for comment on the called-off merger, which was first reported by The Wall Street Journal on Sunday. 

Cigna and Humana couldn’t agree on price and other financial terms of the deal, which might have created a health-care conglomerate with a worth exceeding $140 billion, sources conversant in the matter told the Journal. 

That tie-up would have likely attracted fierce antitrust scrutiny. Shares of the businesses fell sharply in late November after the Journal first reported that they were discussing a merger. 

But Cigna continues to imagine within the merits of a tie-up with Humana, the Journal reported Sunday. The combined company would have been focused on improving access to care and lowering costs for consumers, sources told the Journal.

Jefferies analyst David Windley upgraded shares of Cigna to purchase from hold in a Sunday research note, saying the abandoned Humana deal is a “short-term win” for Cigna investors. 

He added that “making the most of a negative response to deal reports” by announcing its stock buyback plan on Sunday is “music” to Cigna shareholders’ “value-sensitive ears.” 

Windley noted that shares of Cigna have been down sharply since Nov. 6, when reports emerged in regards to the company exploring a sale of its Medicare Advantage business, which manages government medical insurance for people age 65 and older. 

Investors interpreted that potential sale as a “step to cut back its antitrust exposure in a deal to amass” Humana, Windley said.

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