Centene announced that it will acquire its rival, Health Net, for $6.8 billion in cash & stock and assume $500 million in debt. Centene shareholders will own approximately 71% of the newly combined company, while Health Net shareholders will own about 29%. However, this deal may not be impressive enough to IHF investors with the current state of the sector's market.
Healthcare provider exchange traded funds are trading lower, despite another wave of deal making in the industry. The iShares U.S. Healthcare Providers ETF (IHF), one of 2015's top 10 sector ETFs, is currently off by .25%. Nonetheless, investors and financial media expect that there will be a wave of consolidation that will partner some of IHF's largest stakeholders.
Anthem and Cigna are the 4th and 5th largest holdings in IHF, combining for more than 13% of the ETF's weight. However, Cigna rejected a $47 billion offer from Anthem earlier this week. Moreover, United Health has been looking at its rival, Aetna, while Aetna is interested in Humana. These larger deals are expected to be 7 or 8 times as large as the Centene deal.
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Caroline Smith is currently a senior at the University of Notre Dame and is a contributor to Medical Groups. She is majoring in Science-Business and Spanish. After graduation, Caroline plans on entering the field of healthcare consulting. She is most interested in the evolving policy changes in the healthcare industry and enjoys learning about new technologies that are being developed.