Shareholders will get their say this week on two proposed health insurer mergers: Aetna's (NYSE: AET) $37 billion offer for Humana (NYSE: HUM), and Centene's $6.3 billion bid for Health Net (NYSE: HNT).
The major independent proxy advisors, Institutional Shareholders Service (ISS) and Glass Lewis & Co., have given both deals a green light, and Aetna and Humana investors are scheduled to vote on Monday afternoon. Centene and Health Net shareholders will cast their ballots Friday afternoon.
The votes, which come three months after the deals were announced, are an important step in the process. However, regulatory approval for the transactions deals is expected to extend well into 2016.
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ISS and Glass Lewis both judge the cost savings and synergies that will result from the combination of Aetna and Humana to be positive, though they take slightly different views on the impact for Aetna shareholders.
"The acquisition of Humana will have a significant dilutive impact on Aetna shareholders. However, the combination of the two companies is expected to bring significant synergies," ISS analysts wrote in their recommendation to Aetna investors.
They also noted that the competitive merger negotiations between the major insurers in the first half of the year meant that "the deal was reached as part of a robust auction process."
Glass Lewis advisers believe the benefits of the combined company's larger scale and diversification will bring Aetna shareholders value, because the investors will retain a 70 percent equity share of the company following the merger.
Humana shareholders will receive $230 per share under the deal, $125 of that in cash. Glass Lewis concludes the cash provides Humana investors with a "financially compelling opportunity," while still having equity participation in the combined company.
Glass Lewis did express some concern about the golden parachute clause for Humana executives that is written into the agreement.
"We are concerned that (Humana) has agreed to accelerate the vesting of equity awards for certain (named executive officers) upon a change in control of the company. This provision may result in significant windfalls for executives," the proxy advisory firm noted, though not with enough concern to diminish support for the deal.
The two advisory firms also recommend shareholders approve Centene's $6.3 billion proposed acquisition of Health Net, saying that together the two Medicaid plan providers will be able to better compete in an environment of health care consolidation.