Cigna-Humana tie-up would face "regulatory uncertainty" - Bank of America analysts

Investing.com -- A potential tie-up between U.S. health insurer Cigna (NYSE:CI) and peer Humana (NYSE:HUM) would likely face regulatory scrutiny, but any looming hurdles "appear solvable," according to analysts at Bank of America Securities.

Multiple media reports this week have suggested that the two companies are in talks over a possible merger that could exceed $60 billion in value. The Wall Street Journal was the first to report on the discussions on Wednesday.

In particular, the stock-and-cash agreement would give Cigna access to Humana's lucrative Medicare Advantage unit, which manages government health insurance for people aged 65 and older. A combined player, which would also include Cigna's massive pharmacy benefit management division, could have the expanded scale needed to rival health insurance industry powerhouses UnitedHealth Group (NYSE:UNH) and CVS Health (NYSE:CVS).

Challenges, however, are widely expected to come from authorities in Washington. Similar agreements that would have led to further industry consolidation were blocked by competition regulators in 2017, including a proposed $48B acquisition of Anthem -- now called Elevance Health -- by Cigna.

Yet in a note to clients, the Bank of America analysts said that while many investors would likely be cautious about any antitrust concerns surrounding the deal, they see "minimal [...] overlap" between the two businesses.

They added that Cigna would likely need to divest its Medicare Advantage business for regulators to sign off on the deal. According to Reuters, Cigna began exploring a sale of the division earlier this month.

"While there is risk to approval of the potential deal, ultimately we believe the issues appear solvable," the analysts said.