S&P: Anthem, Cigna on watch

Standard & Poor’s said it placed the ratings on Anthem Inc. and Cigna Corp. on CreditWatch with negative implications.

The CreditWatch placement follows news that Anthem made a non-binding proposal to acquire Cigna, S&P said.

Anthem’s proposal values Cigna at $53.8 billion and Anthem is expected to fund its acquisition with a mix of stock, cash and debt, the agency said.

However, Cigna’s board rejected the proposal June 21, S&P said.

Therefore, the agency said it placed the ratings on CreditWatch based on an assumption that this is an ongoing process and a potential transaction may have a credit impact on the combined entity’s business and financial risk profiles.

If a similarly priced proposal is accepted, the Anthem/Cigna merger would be the largest in the history of the U.S. health-insurance industry, S&P said.

The combined entity would benefit from improved size and scale, the agency said, and diversification.

Any such transaction will be complex and lengthy, involving a potentially high degree of integration risk, S&P added.

The transaction could have a negative impact on the combined entity’s financial risk profile, as well, the agency said.

Given the deal size, a significant amount of the transaction will be financed with debt, S&P said.

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