Carl Icahn to Publicly Oppose $54 Billion Cigna-Express Scripts Deal

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Carl Icahn

is going public with his campaign to scuttle

Cigna


CI -0.73%

Corp.’s $54 billion plan to buy

Express Scripts


ESRX -0.89%

Holding Co.

The billionaire activist investor plans to send an open letter Tuesday urging fellow Cigna shareholders to vote against the deal, which he calls a “$60 billion folly” carrying a “ridiculous” price tag, according to a draft seen by The Wall Street Journal.

“Cigna is dramatically overpaying for a highly challenged

Express Scripts


ESRX -0.89%

that is facing existential risks on several fronts,” Mr. Icahn writes.

The Journal previously reported that Mr. Icahn bought a sizable Cigna stake, plans to vote against the health insurer’s proposed purchase of the pharmacy-benefit manager and was considering publicly airing his concerns to persuade other shareholders to do the same. His concerns include competitive risk from

Amazon.com
Inc.

and indications from the Trump administration that it could limit the manufacturer rebates pharmacy-benefit managers get.

An

Express Scripts

spokesman said Monday that its second-quarter results last week, together with an improved outlook in client-retention rates and prescription volume, show the business is well positioned to grow. He also said drug manufacturers could choose to cut prices rather than offer rebates, the majority of which Express Scripts passes onto clients. Cigna had no immediate comment.

The companies have said the deal would allow them to offer expanded health-care services and control costs.

Mr. Icahn and his affiliates own about 0.56% of Cigna, a stake worth more than $250 million as of Monday’s market close, according to people familiar with the matter. But the odds are against him, some observers say, in part because he has limited time to rally other shareholders. What’s more, it isn’t known how much of the stake he can actually vote, because the record date has already passed. Mr. Icahn says in the letter he also holds a short position in Express Scripts, which means he is betting its share price will decrease.

Since the Journal reported Wednesday that Mr. Icahn was mulling action, Cigna shares have jumped 4.7% while Express Scripts stock has dropped 3.3%. “Competitive risk from Amazon, arguably the strongest competitor in the world, will be an existential threat to PBMs like Express Scripts,” Mr. Icahn says, adding that Express Scripts’ outlook has only worsened in the months since the tie-up was announced.

Cigna in March agreed to pay what amounted to about $96.03 a share in cash and stock for Express Scripts. Cigna stock dropped sharply in the wake of the announcement as investors questioned the logic of the transaction, and in a sign investors aren’t sure the deal will go through, Express Scripts stock had been trading significantly below that level.

He suggests that Cigna instead strike a multiyear partnership with a pharmacy-benefit manager—potentially Express Scripts—and buy back stock.

Cigna and Express Scripts shareholders are set to vote on the deal Aug. 24. A majority of the shares outstanding of both companies must be voted for the deal in order for it to close.

Write to Cara Lombardo at [email protected]

Appeared in the August 7, 2018, print edition as ‘Icahn Calls Cigna Deal A ‘$60 Billion Folly’.’



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