Health insurance giant Aetna will acquire rival insurer Humana in a $37 billion deal announced July 3. The transaction equals about $230 per Humana share.

As Aetna executives describe it, the deal brings together Humana's growing Medicare Advantage business with Aetna's diversified portfolio and commercial capabilities to create a company serving the most seniors in the Medicare Advantage program and the second-largest managed care company in the country.

As they see it, the new company will help drive better value and higher-quality healthcare by reducing administrative costs, leveraging best-in-breed practices from the two companies, enabling Aetna to better compete with more cost effective products.

Aetna executives point to Humana's chronic-care capabilities that measurably improve health outcomes for larger populations, as one example. The combined company will be well positioned to offer a broad choice of affordable, consumer-centric healthcare products, they say, helping to constrain cost growth, improve health outcomes and promote wellness. The combination will provide Aetna with an enhanced ability to work with providers and create value-based payment agreements that result in better care to consumers, and spread cutting-edge clinical practices and quality care.

The boards of directors of both companies have approved the terms of agreement.

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Under those terms, Humana stockholders will receive $125 in cash and 0.8375 Aetna common shares for each Humana share. As a result of the transaction, Aetna's shareholders would own approximately 74 percent of the combined company and Humana's shareholders would own approximately 26 percent.
Closing is expected to be in the second half of 2016.

After closing, Aetna will make Louisville the headquarters for its Medicare, Medicaid and TRICARE businesses, and will maintain a significant corporate presence in Louisville. Founded in Louisville more than 50 years ago, Humana has a long history of contributing to the Louisville community.

"The acquisition of Humana aligns two great companies and will significantly advance our strategy of more effectively serving members in a rapidly changing healthcare industry," said Mark T. Bertolini, Aetna chairman and CEO, in announcing the deal. "This combination will allow us to continue to invest in excellent service for our members and strengthen our partnerships with providers to deliver high quality care at an affordable price. We have great respect for Humana, their talented team, their culture and their strong medical management capabilities. We look forward to working with them following the closing, as we enhance our combined portfolio of innovative healthcare offerings to provide significant benefits to consumers, employers and providers, and to continue delivering value for our shareholders."

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"Aetna and Humana share a strong commitment to improving the health and well-being of consumers, whatever their needs and wherever they are on their lifelong health journey," said Bruce D. Broussard, president and CEO of Humana, in a statement. "Through the use of technology and integrated services to simplify the consumer experience, the combined entity will be even more effective in meeting the health needs of many more people  especially people with chronic conditions, who will benefit from Humana's home health, pharmacy management and data analytics programs. The transaction is a testament to the accomplishments of Humana associates and an outstanding outcome for our shareholders, who will receive an immediate premium and the opportunity to participate in the growth potential of the combined organization."

Following the close of the transaction, Bertolini will serve as chairman and CEO of the combined company. At the time of the closing, the Aetna board of directors will be composed of 12 current Aetna directors and four Humana directors, for a total of sixteen directors.

The transaction is subject to customary closing conditions, including the approval by Humana stockholders of the merger agreement, the approval by Aetna shareholders of the issuance of shares in the transaction, as well as the expiration of the federal Hart-Scott-Rodino antitrust waiting period and approvals of state departments of insurance and other regulators.

Aetna has received commitments from both Citi and UBS Investment Bank in connection with the financing of the transaction.