Updated at 7:04 a.m.
Humana Inc. said on Monday it would not bid for Clayton-based Centene Corp., quelling speculation that it would acquire the health insurer that has already agreed to buy smaller rival WellCare Health Plans Inc. for $15.27 billion.
Centene shares fell 6.9% to $53.75 before the bell, while Humana rose 2% to $250. WellCare shares remained unchanged.
Humana said it was making an exception to its "no-comment policy" to confirm it would not bid for Centene "in light of the significant investor speculation and persistent market rumors."
SVB Leerink analyst Ana Gupte said that Humana needed to respond to speculation that had been creating "undue pressure" on its stock.
"Shorter term activist shareholders of Centene may be disappointed by it, but large long-only institutional share holders of both Centene and Humana are likely relieved," she said in an email.
Last month, Reuters reported hedge funds Corvex Management LP and Sachem Head Capital Management LP had built stakes in Centene and were exploring challenging its acquisition of WellCare.
Hedge funds seek short-term gain but probably don't have enough votes to block acquisition of WellCare
Centene's acquisition of WellCare would create a major new player in government-sponsored health care, serving 22 million members across 50 states. It would allow it to bulk up its government-backed Medicare and Medicaid businesses, while reducing exposure to Obamacare healthcare exchanges.
Centene and WellCare shareholders are set to vote on their deal on June 24.