In the “you’ve got to be kidding me” category, shares of Humana soared last week on rumors that the company was in talks to be acquired by Aetna.
Whatever Humana’s motivation might be given its battered stock price, I doubt this is the right move for Aetna. I always get nervous when a company announces a major shift in strategy, especially if the shift is spearheaded by a major acquisition. Does this approach ever work?
The acquistion of Humana would represent a major shift for Aetna on two fronts:
1. The sheer size of the deal would dwarf anything Aetna has pursued since its ill-conceived mega-merger and acquistions strategy of the 1990s (US Healthcare, Prudential, NYLCare). Instead, Aetna has since successfully pursued a lot of small, targeted deals aimed at expanding its product portfolio and geographic reach in promising areas.
2. The acquisition of Humana would represent a major expansion for Aetna into Medicare in particular and government business in general—this at a time of heightened regulatory uncertainty and confusion over the future of Medicare health plans.
In short, I’d be surprised if this rumor is well-founded.
I last spoke to Aetna chairman and CEO Ron Williams two months ago, and he told me that the company remains consistent in its approach to M&A. Granted, this wouldn’t be the first time a CEO told me one thing and did another.
As for Humana CEO Michael McCallister, I usually interview him every year for the annual outlook for managed care issue of Managed Healthcare Market Report. This year he never got back to me. Hmmmm!
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