Health insurer giant Aetna said Monday it will buy Coventry Health Care for $7.3 billion, including Coventry's debt, a deal that will expand its Medicare and Medicaid business.
The acquisition is projected to add nearly 4 million medical members and 1.5 million Medicare Part D members to Aetna's membership, making the Hartford, Conn.-based company one of the largest providers of government-financed health care.
The deal will also substantially increase Aetna's Medicaid footprint, creating more opportunity to participate in the expansion of Medicaid and to pursue high acuity populations as they move into managed care.
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The boards of both companies have approved the deal.
Paying a 20 percent premium over Friday's closing price, Aetna will give Coventry shareholders $27.30 in cash and 0.3885 Aetna common shares for each Coventry share, which comes out to $42.08 per share.
"Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies," Aetna's Chief Executive, Mark T. Bertolini, said in a statement.
Coventry is a diversified managed health care company that offers a full portfolio of risk and fee-based products, including Medicare Advantage and Medicare Part D programs, Medicaid managed care plans, group and individual health insurance, coverage for specialty services such as workers' compensation, and network rental services.
Aetna also said the deal helps them remain competitive for when health exchanges go into effect due to the Patient Protection and Affordable Care Act. The Coventry acquisition is one of the biggest health care deals since the PPACA was signed into law in 2010.
Industry insiders have predicted the PPACA will cause more health insurer consolidation.
The acquisition is expected to close in mid-2013, both companies said.
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