AET

Aetna Inc

Healthcare, Event Driven/Special Sit


Presented:11/22/2016
Price:$128.42
Cap:$45.50B
Current Price:$212.70
Cap:$69.64B

Presented

Date11/22/2016
Price$128.42
Market Cap$45.50B
Ent Value$61.63B
P/E Ratio18.61x
Book Value$52.11
Div Yield0.01%
Shares O/S354.30M
Ave Daily Vol2,383,888
Short Int2.00%

Current

Price$212.70
Market Cap$69.64B
Aetna, Inc. engages in the provision of traditional, voluntary, and consumer-directed health insurance products and related services. It operates through the following segments: Health Care, Group Insurance, and Large Case Pensions. The Health Care segment consists of medical, pharmacy benefit management services, dental, behavioral health, and vision plans offered on insured and employer-funded basis. The Group Insurance segment includes group life insurance and group disability products. The Large Case Pensions segment manages retirement products for tax-qualified pension plans. The company was founded by Eliphalet Adams Bulkeley in 1853 and is headquartered in Hartford, CT.

Publicly traded companies mentioned herein: Aetna Inc (AET), Cigna Corporation (CI), Humana Inc (HUM), Molina Healthcare Inc (MOH), UnitedHealthcare Group Inc (UNH)

Highlights

With the Aetna (AET)/ Humana (HUM) trial set to start on December 5th and the deal spread sitting at ~14% the presenter sees an opportunity to be long the stocks of both companies (at $127 and $200, respectively). In his opinion, the risk/ reward is favorable regardless of the outcome of the trial, and investors have a call option on the companies being allowed to merge. Downside risk should be minimal (i.e., ~5%) and in his no-deal scenario the stocks are likely to appreciate modestly. If the deal is approved, the upside is substantial as a pro forma Aetna could generate anywhere from $12/share of earnings to $15.50 depending on the assumptions used. At a 15x multiple (a blend of the companies’ present multiples) the implied price objective range for the merged company is $180-230 (up from ~$127), and this could be realized by the end of 2017.

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Idea Discussion

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