01:37 PM EDT, 04/22/2024 (MT Newswires) -- Cigna ( CI ) and Humana's (HUM) merger now seems plausible despite the latter's lower earnings per share estimate, Jefferies said in a note Monday.

A deal made now would be at least modestly accretive to Cigna ( CI ) as long as Humana achieves $23 of EPS in 2027 and Cigna ( CI ) doesn't pay more than $470 per share --- a highly unlikely scenario, Jefferies' analysts said.

They added that their model does not include divestiture of any part of the pharmacy benefit management unit, regulatory costs, or a potential breakup fee should Cigna ( CI ) prove unsuccessful.

Cigna ( CI ) abandoned its pursuit of Humana in December reportedly due to disagreements over financial arrangements.

The analysts said that one of their key assumptions are, Cigna ( CI ) will pay about 15.6 times Humana's estimated earnings for 2027, debt-to-capital ratio of 48%, and expected savings of 20% on Humana's expenses by 2025. Additionally, the interest rate on the combined debt of about $63 billion will be about 5.5%.

Humana must cut benefits by $26 in 2025 to simply offset margin pressure from the low rate.

Jefferies has a $381 price target on Humana, down from $411, and a $385 price target on Cigna ( CI ), and a buy rating for both.