Aetna will take out $3.2 billion bond to fund Humana acquisition
Merger is going through the federal regulatory process and approval in certain states.
"Aetna building in Hartford, Connecticut" by grendel|khan is licensed under CC BY 2.5
Aetna plans to take out a $3.2 billion bond to partially fund its proposed $37 billion acquisition of Humana, the insurer told the Securities and Exchange Commission in documents filed June 2.
The bond will add additional interest expense of $58.5 million in 2015 and $14.4 million during the first quarter of 2016, Aetna said.
This assumes a three-year loan and an annual interest rate of 2.017 percent, Aetna said.
Total acquisition-related transaction costs expected to be incurred by Aetna and Humana are estimated to be $526.8 million and $118.7 million, respectively. Of that, $99.7 million and $54.1 million, respectively, were incurred through March 31, 2016, Aetna said.
The merger, and another mega-merger proposal between Anthem and Cigna for $54 billion, is going through the federal regulatory process and approval in certain states.
[Also: Missouri rejects Aetna, Humana merger, would block business if takeover continues]
While stockholders and shareholders of both Aetna and Humana approved the merger agreement, certain Humana stockholders have filed three class action complaints challenging the merger, Humana told the Securities and Exchange Commission. Two were filed in the Circuit Court of Jefferson County, Kentucky and one in the Court of Chancery of the State of Delaware, Humana said.
The complaints name as defendants each member of Humana's board of directors, Aetna, and, in the case of the Delaware complaint, Humana, the insurer said.
The complaints allege, among other things, that the individual members of the board of directors placed their own financial interest ahead of stockholders, failed to take steps to maximize the value of Humana to stockholders, and that the merger undervalues Humana.
The plaintiffs want the merger agreement rescinded and are seeking an order to prevent Humana and Aetna from completing their consolidation, as well as costs and attorneys' fees.
[Also: Aetna says Humana merger on track, reports big gains in Medicare Advantage segment]
On August 20, 2015, the parties in the Kentucky state cases filed a stipulation and proposed order with the court to consolidate these cases into a single action called Humana Inc. Shareholder Litigation.
Ahead of the merger, Humana, which has a large investment in the Medicare market, said in statements filed with the Securities and Exchange Commission, that on January 1, 2015, it realigned certain businesses. The most significant was reclassifying Medicare benefits offered to groups from the group segment to the retail segment, bringing all of its Medicare offerings together in one segment to be managed collectively. This realignment recognizes that in some instances, Humana markets directly to individuals that are part of a group Medicare account, it said.
Twitter: @SusanJMorse
