Proxy Blog

Cigna’s Proposed Acquisition of Express Scripts

July 24, 2018

The proxy had two proposals related to the acquisition:

  1. To adopt the Agreement and Plan of Merger…
  2. To approve the adjournment of the special meeting…

Magni voted against both proposals on the proxy.

  1. Most large acquisitions destroy shareholder value. Both McKinsey and Bain have done
    studies showing that many acquisitions destroy value. To increase the probability of creating value and to maximize the amount of value created (relative to the acquisition price), best practices are frequent, smaller acquisitions made as part of a clear strategy. Large acquisitions of public companies tend to be the least successful. The proposed acquisition of Express Scripts has a deal value exceeding $50 billion.
  2. Media coverage of the deal has been negative. erikkobayashisolomon/2018/03/09/cigna-express-scripts-merger-quicktake-the- beginning-of-the-end/#18c3a8864b5c.
  3. Acquired company business model is at risk. Express Scripts is a Pharmacy Benefits Manager (PBM). The company uses purchasing power to negotiate lower prices on pharmaceuticals. The influence of PBMs has become so large that pharmaceutical companies have increased list prices to enable higher percentage discounts to PBMs
    as part of contract negotiations. There is increasing public focus, and governmental focus, on the high and rising list prices for pharmaceuticals. There is potential legislation that could have a material negative impact on PBMs (e.g., price transparency including discounts, level pricing requirements between PBMs and other distribution channels).