Anthem (NYSE:ANTM) said it would buy Cigna (NYSE:CI) in a deal valued at $54.2 billion, creating the largest U.S. health insurer by membership.
Indianapolis, Indiana-based Anthem said it will pay $103.40 in cash and 0.5152 of its shares for every Cigna share.
The deal is valued at $183.36 per share based on Anthem's yesterday close of $155.21.
Shares of Anthem were down 2.1 percent at $151.94 at 10:44 a.m. in New York. Shares of Cigna fell 4.6 percent to $147.30.
The transaction combines the second- and fifth-largest health insurers by revenue and merges two companies with a huge footprint in commercial insurance, the type of coverage provided to employers and consumers. Cigna had previously rejected bids for as much as $184 from Anthem, with disagreements over who would hold key positions after the merger.
The merged company is projected to have around $115 billion in annual revenue and cover about 53.2 million people.
The deal is the biggest ever in the health insurance industry. It comes three weeks after Aetna (NYSE:AET) agreed to buy Humana (NYSE:HUM) for $37 billion and is part of an industry-wide consolidation following the roll-out of President Barack Obama's healthcare law.
The deal requires government approval, and legal experts have said regulators are likely take a close look at the recent deals in the health-insurance industry.
The companies said today that they expect the deal to close in the second half of 2016.
Anthem chief executive officer Joseph Swedish will remain CEO and add the chairman title, while Cigna CEO David Cordani will become president and operations chief.
"This transaction better positions us to serve the evolving health care market with increased participation by individual consumers and growth in the government business and the need for solutions that advance affordability, choice and quality," Swedish said.
Anthem has 52,000 employees, $78.5 billion in annual revenue and 38.5 million members, while Cigna has 37,000 employees, $36.5 billion in revenue and 14.5 million members. Anthem already runs Blue Cross and Blue Shield insurance plans in 14 states and Medicaid offerings through the Amerigroup brand in 19 states.
Credit Suisse Group AG and UBS Group AG advised Anthem on the transaction, while Cigna got help from Morgan Stanley.