Health insurer Humana, Louisville, Ky., is reportedly working with an investment bank to explore a sale.
The Wall Street Journal reported Friday that Humana hired Goldman Sachs Group to gauge interest. Aetna and Cigna Corp. are among the interested buyers, according to reports. Humana did not immediately respond to Modern Healthcare's request for comment. Goldman Sachs declined to comment.
Humana Chief Financial Officer Brian Kane worked at Goldman Sachs for 17 years before joining the insurer last summer. While at Goldman, Kane advised large transactions among managed-care companies. Humana is one of the nation's largest Medicare Advantage insurers with more than 3 million covered seniors. The company has also been a rumored takeover target for more than a year.
However, a potential buyer will be taking on a few risks. Humana was the only publicly traded insurer in the first quarter to experience higher medical costs and more inpatient admissions. Humana is also the target of a federal probe over its Medicare risk-adjustment practices.
The U.S. Justice Department is looking into whether Humana overstated the risk scores of its Medicare members. Acquiring Humana will likely require a significant amount of money, if a sale occurs at all. Humana's earnings before interest, taxes, depreciation and amortization, or EBITDA, are about $2.7 billion. Using the latest industry multiples of EBITDA, a buyer would likely pay from $35 billion to $45 billion for Humana. Trading of Humana shares halted briefly Friday afternoon, and prices soared past $200 to record highs after trading resumed.
