ISS Backs Cigna-Express Scripts Deal

By Cara Lombardo 

Carl Icahn could have trouble finding enough allies to block Cigna Corp.'s $54 billion deal to buy pharmacy-benefit manager Express Scripts Holding Co.

Institutional Shareholder Services, one of two major proxy-advisory firms, is recommending that Cigna shareholders support the deal in a vote later this month, according to a report ISS clients received Friday and viewed by The Wall Street Journal.

ISS said Cigna's strategic rationale for buying Express Scripts makes sense, given the rising costs of prescription drugs, and that the potential benefits of the combination outweigh t he risks raised by Mr. Icahn.

The billionaire activist investor has been urging other shareholders to reject the deal, which he calls a "$60 billion folly." He doesn't think Cigna should spend that much money on Express Scripts, which as a pharmacy-benefit manager could see its business model change under a Trump administration proposal to lower drug prices. He is also concerned about the changing pharmacy industry landscape, especially as Amazon.com Inc. expands its presence.

But Cigna says Mr. Icahn doesn't understand the dynamics of health care and appears to be betting against the deal for a profit. And hedge fund Glenview Capital Management LLC, which has a $1.3 billion stake split between Cigna and Express Scripts, on Thursday publicly urged other Cigna shareholders to support the deal. Glenview said the deal will save the companies' customers "billions of incremental dollars annually."

Proxy-advisory firms rarely recommend that its clients, which include institutional investors and money managers, vote against proposed mergers. But both ISS and Glass Lewis recently recommended that shareholders reject Rite Aid Corp.'s proposed merger with grocer Albertsons Cos, citing concerns with the process, and the two companies called off that deal the evening before a scheduled shareholder vote.

Cigna in March agreed to pay what amounted to about $96.03 a share in cash and stock for Express Scripts.

Cigna and Express Scripts are set to vote on the deal Aug. 24. It requires signoff from a majority of shareholders of both companies.

Write to Cara Lombardo at [e-mail]

(END) Dow Jones Newswires

August 10, 2018 09:25 ET (13:25 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.