Aetna to fund $7.3 billion Coventry acquisition using cash, new debt

By Lisa Kerner

Charlotte, N.C., Aug. 20 - Aetna Inc. announced a definitive agreement to acquire Coventry Health Care, Inc. in a cash-and-stock deal valued at about $7.3 billion including the assumption of $1.6 billion of Coventry debt.

The deal is structured as 65% stock and 35% cash.

Aetna expects to fund the $27.30 per share cash portion of the transaction using a combination of cash on hand from both companies and by issuing about $2.5 billion of new debt and commercial paper.

Aetna's share repurchases will be stalled in 2012, and the company will have limited ability to buy shares until the transaction closes in mid-2013, according to executives during a conference call on Monday.

Aetna will "come out of the gate" with leverage of 40% debt to total capitalization, a figure that the company has committed to bringing down to 35% within 24 months.

During that time, Aetna, a Hartford, Conn.-based health insurance company, will be balancing cash flows between reduction of debt and share repurchases.

Both Aetna and Coventry's boards of directors have approved the transaction.

Coventry stockholders will receive $27.30 of cash and 0.3885 Aetna common shares for each Coventry share, or $42.08 per share based on the closing price of Aetna common shares on Friday.

Coventry is a managed health-care company based in Bethesda, Md.

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