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Three Key Points on Monday's Humana-Aetna Vote


This story has been updated.

Aetna's proposed buyout of health insurer Humana was approved Monday by stockholders of the two companies.

The deal was approved by more than 99 percent of the voting shares of each company. In July, executives from the two companies agreed on a $37 billion purchase price for the Louisville-based Fortune 500 company. Aetna is based in Connecticut.

In a statement after the votes, Aetna chairman and CEO Mark Bertolini called Humana an "ideal partner" in his company's efforts to reshape the health insurance industry.

“The complementary combination of our companies brings together Humana’s leadership and expertise in the Medicare Advantage business with Aetna’s strengths in the large commercial health insurance business," he said.

The vote doesn't clear the way for the deal to proceed — federal regulators are still evaluating the terms, and it will likely be months before we have their decision. They are considering the Aetna-Humana proposal in the context of a changing health insurance field, with Anthem's proposed $54 billion takeover of Cigna also on their docket.

Both Aetna and Humana expect their deal to close in the second half of 2016.

Still, shareholder approval is essential to the deal, which would make Aetna the second-biggest health insurer in the country.

Here are three key points on today's vote.

1.  Is the deal fair to Humana shareholders?

In a recent filing with the Securities and Exchange Commission, Humana said it would settle lawsuits from shareholders claiming the deal undervalues the company. According to terms announced this summer, Humana stockholders would receive about $230 per share. The company’s stock closed at $184 on Friday.

John Solak, one of the shareholders who filed suit, claimed the deal shorts Humana based on expected growth in its government business, and specifically Medicare Advantage. As The Courier-Journal reported, Humana saw an 18 percent increase in first-quarter revenues from the program this year over last.

No one is commenting on the terms of a possible settlement.

2. What will it mean for Louisville workers?

There are more than 12,000 Humana employees in Louisville. In various public statements, including a conference call with analysts, Aetna's top brass have said they plan to keep the Louisville workforce robust.

Should the deal go through, the new company would locate its government business — including Medicaid, Medicare and Medicare Advantage — here. That was reiterated in a recent SEC filing in response to the shareholder lawsuits.

Mayor Greg Fischer has been optimistic about the future of the workforce here. And Aetna has projected that 56 percent of the newly merged company's revenues would come from its government business.

Still, "synergies" — or efficiencies that often come from eliminating duplicate services post-merger — are a key part of the deal's value, according to Institutional Shareholder Services, an institutional proxy adviser to Aetna shareholders. There's no way to know what that will mean to Louisville workers until the deal is finalized.

3. About those golden parachutes. 

Glass Lewis & Co., another shareholder adviser on the deal, has expressed concern about the golden parachutes due Humana's top officials at the consummation of the deal (and, per their agreements filed with the SEC, if they do not continue on with Aetna).

They're massive. The top six Humana officials — all of whom are men — are set to receive some $66 million in golden parachutes as long as the deal wraps and their employment is terminated.

Particularly irksome has been the compensation package for CEO Bruce Broussard, which was finalized just hours before Aetna and Humana officials announced the deal in July, as The C-J reported. Broussard, who joined Humana in 2011, would receive a $16.9 million golden parachute. Chief Operating Officer James Murray, a veteran of the company, would receive $19.7 million.

Glass Lewis made note of the compensation in its guidance but didn't think it should scuttle the deal for shareholders.

Stephen George is President and CEO of Louisville Public Media. Email Stephen at sgeorge@lpm.org.