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00:00And thinking about multi-billion dollar negotiations two CEOs pulled off just that ahead of the holiday weekend July 3rd Aetna announced that it would buy a rival insurer Humana for thirty five billion dollars including cash and stock and a rich billion dollar breakup fee. With me now from Aetna is headquarters in Hartford Connecticut. Are the heads of those companies Mark Bertolini who's the chairman and CEO of the acquire Aetna and Bruce Bouchard who is the president and CEO of Humana. OK. So Mark let me start with you on this. I seem to share prices of actually both of your companies declined on this news so investors didn't seem to be buying this merger. How do you convince them that that that a merger between that and Humana makes sense for them. Well I don't think it's all investors . Betty I actually think it's the arbs that got in the deal looking for opportunity and I am not quite sure they know how to do this trade because this is a longer term strategy. This is a very big combination that's going to have a longer term impact on the quality of health care the cost of health care in a an evolving consumer marketplace. So I'm not quite sure they know how to play it. It'll settle down and the noise will come out of the system and we'll do just fine. OK. Bruce is it going to lower health care costs for consumers. Very much so I think as you see the transition from a more employer based to a consumer based model and a value based reimbursement model from a fee for service model. These combined organizations will have the capability to meet both of those trends both in the way of our clinical capabilities on Humana side and the deep deep employee relationships that Aetna has on the on their side. Mark is there going to have to be though some divestiture of your business or Humana as business in order to pass regulators. Yes we do have actually a very detailed review body of of of the businesses at a local market level. So this is not state wide . This is not citywide This is down to the zip code and rating area kind of analysis and we will have to do some divestitures . We included those divestitures in the value of the deal and the costs of the deal. And we still believe they get very healthy returns over time. How much I mean what kind of chunk of revenue are we talking about that you might have to give up . Yeah we're we're we're all we're really not broadcasting that number that's subject to our conversation with the Department of Justice. We don't want to get ahead of ourselves okay because there are some estimates already out there right. Know Sterne Agee came out and said that you might have to give up about 13 percent of your revenue in order to get this past regulators. I mean is that way off the mark. I would just say that we're not we're not going to talk about that at this time and everybody's doing an analysis that is far far far less detail level than we have. And I think that's where the rubber is really going at the road in terms of the value for investors. You know I understand that that we can't say a blanket all shareholders are not happy or are not satisfied perhaps with the deal if you look at the share price. But you know Bruce you have to look at where the offer is around to twenty three for the company the share price though is about is well below well below that price about 30 dollars below that. What do you think that's telling telling you. Well I think it's just telling you the where Mark was just talking about and that's the halves. I think the arbs are very confused they've been hurt over the last few deals with a long justice cycle. And I just see that in the stock. I will tell you the investors that we've talked to they are very very excited about the future of the combined companies and we'll be holders post deal. So I don't think it's the longer term investors I really think there is some confusion out there on the ARB side of how to play this particular transaction considering that the FTSE review is that partly you know on you and in terms of the messaging to the investors I think the messages that I have to. I'm not. Not all of us are the same body. So I think we're gonna have to let the kind of shareholders who value this deal find their way through it it could be a huge buying opportunity for them for all intensive purposes and so I think we just need to let it clear through . We've got a long time between now and when the transaction closes. That's the point at which all of this will be of true value and so we. But we're gonna we're gonna we're gonna let the market sort itself out. And Mark why are these deals happening right now. I mean it seems like you've had certainly we've seen lots of drug deals but now we're seeing some health insurance deals. You've got Anthem and Cigna that are at play . I mean why now. Well I think the big story in all of this is that the business model has to change. We now have doctors on a cash basis hospitals on a revenue basis and insurers on a margin basis. It's a wonder the system works at all with three different economic models to get everybody on the same page. We have to have a fundamentally different level of partnership that can no longer be smash mouth at the local market. It actually has to be a partnership between payers and providers on making sure that we're getting the right outcome which is a healthy economically productive and happy member. And so we look at that as the outcome and we will award the health system for doing that we're going to start to see trend vendors actually make the market more affordable for consumers. Bruce do you think does any of this though the timing at least have something to do with what we heard from the Supreme Court and the affirmation of the Affordable Care Act. No I truly believe this is a long term trend. I think the exchanges have brought some motivation to it but I will tell you the ACA and all the items related to that stimulated these kind of discussions but wasn't the reason I were Mark is going this transition from a very deep consumer centric model and a model with value based reimbursement is really driving the industry from a sick care model to a health model. And there's technology that needs to be invested in these partnerships that have to be created in size and scale from the ability to insurance affordable offers all of that. Mark before we go I mean speaking about the timing . Did any. Did the fact that there are other mergers out there are other companies in play. And again I point to a Cigna or an anthem and their parent did that have anything to do with you wanting to make sure that you and Bruce get together in a room and iron this deal out. No I think you know it's very interesting. We've been looking at this kind of combination for five years as a company. I know Bruce and his team have been thinking through over the last few years about how they see the future and what we knew with all the noise going around was that we had to lock and load on what we thought was best for our customers best for our shareholders and best for the people that we serve in the employer community and the provider community . And this was the deal. And so we said you know let all the noise rage and all the rumors amuse people in the marketplace and keep the news cycle going and we're gonna get this deal done and move ahead. All right. Thank you so much. Mark Gurman any of that and then also Bruce pro side of Humana. Thank you gentlemen for joining me on your DL .

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Aetna-Humana Deal to Lower Consumer Costs, CEOs Say

Mark Bertolini, chief executive officer of Aetna Inc., and Bruce Broussard, chief executive officer of Humana Inc., talk about the planned purchase of Humana by Aetna, its impact on consumer health-care costs and consolidation in the health-insurance industry. They speak with Betty Liu on Bloomberg Television's "Bloomberg Markets." (Source: Bloomberg)

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