The iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) is up 15.3% this year and trading just 2.4% below its all-time high set just a couple of weeks ago. Over the past three years, the fund has surged nearly 132% and since the start of 2014, IHF has attracted $286.4 million of its $893.7 million in assets under management.
That is to say IHF has had plenty of catalysts, including the Affordable Care Act or Obamacare, driving it higher over the past several years. If Wall Street bankers have their way, IHF is not done climbing as increased mergers and acquisitions activity in the U.S. healthcare providers industry is shaping up to be the next positive catalyst for IHF. [More M&A Coming for This Healthcare ETF]
“Many observers say they believe that the industry is due for a substantial round of consolidation,” reports Laura Cooper for The Deal.
Humana (NYSE: HUM), IHF’s sixth-largest holding at a weight of 6.1%, has been recently bandied about as a possible target for either Aetna (NYSE: AET) or Cigna (NYSE: CI). Aetna and Cigna are IHF’s fourth- and fifth-largest holdings, respectively, combining for 13.3% of the ETF’s weight.
FTI Consulting managing director Jim Toole told The Deal that Anthem (NYSE: ANTM), IHF’s third-largest holding at a weight of 7.2%, is the most likely acquirer for Humana. Toole also noted that if Aetna or Anthem moves on Humana, Cigna could be the next target in the healthcare providers space. If Aetna does not get its hands on Humana, it makes for a logical acquirer of Cigna.
Earlier this year, Dow component UnitedHealth (NYSE: UNH), IHF’s largest holding at a weight of 13.4%, agreed to acquire Catamaran for $12.8 billion in cash.
In 2009, Express Scripts (NasdaqGM: ESRX) spent $4.7 billion to acquire WellPoint and followed up that deal with the $29 billion acquisition of Medco in 2012. [Healthcare ETFs Remain Sturdy]
Last month, shares of Quest Diagnostics (NYSE: DGX), the provider of healthcare diagnostic testing services, after it was rumored that that company could be a takeover target as well though chatter to that effect has since ebbed. Quest Diagnostics is nearly 2.7% of IHF’s weight.
iShares U.S. Healthcare Providers