Humana’s shares plunged nearly 10 percent today after an antitrust trade publication reported that federal regulators have serious concerns about the company’s acquisition by rival Aetna, whose shares fell 4 percent.
Officials from both companies are set to meet on Friday with antitrust regulators of the U.S. Department of Justice who have voiced “significant concerns” about the merger’s impact, especially on Medicare Advantage customers, according to trade publication MLex.
Aetna wants to buy Humana for $37 billion. The companies have said that the combined $115 billion company would offer better services at a lower cost. However, some consumer and industry organizations and powerful legislators have said they believe the merger would significantly undermine competition and lead to higher prices for consumers.
The deal has been approved by at least 17 of the 20 states in which the companies do business, but it also needs the go-ahead from the DoJ, which wants to make sure that the merger does not materially reduce competition.
Unnamed sources told Bloomberg News this week that Aetna was weighing the sale of billions of dollars in assets to quell the regulators’ concerns. However, MLex today said the feds remain concerned about the merger’s impact on competition.
The Kaiser Family Foundation said last July that Aetna and Humana combined would have a Medicare Advantage market share exceeding 50 percent in 10 states and higher than 67 percent in five states.
Meanwhile, Reuters reported that Friday’s meeting with the DoJ’s leaders, including William Baer, assistant attorney general for the Antitrust Division, “signals (that) the review is entering a final, make-or-break stage.”
Baer had told a U.S. Senate subcommittee in March that the proposed merger demands tough scrutiny.
Humana’s shares today trended down slightly early in the day before a steep plunge that began at about 12:32 p.m. Shares closed at $163.74, down $17.24 or 9.58 percent. The S&P 500 was essentially unchanged.
The sell-off may indicate that investors believe that federal regulators are likely to block the deal.