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UPDATED: Anthem to buy Cigna for $54 billion

Deal will eclipse Aetna's merger with Humana as the biggest ever health insurance takeover.

Anthem's headquarters

Anthem will buy Cigna for $54.2 billion, the insurer announced on Friday, in a deal that will reduce the former "Big Five" private health insurers to just three.

Aetna has already announced a $37 billion deal to acquire Humana. If both deals are approved, Anthem, Aetna and UnitedHealthcare would stand as the largest insurers in the United States.

[Also: Aetna buys Humana for $37 billion]

The new deal would also eclipse Aetna's merger as the biggest ever health insurance takeover.

"We believe that this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve," the company said in a statement. "The combined company will have a competitive presence across commercial, government, international and specialty segments."

According to Anthem, the deal, worth $188 per share of Cigna stock, will add more than $115 billion in annual revenue to the company.

Anthem CEO Joseph Swedish will serve as CEO of the combined company while Cigna CEO David Cordani will become chief operating officer.

The announcement came just weeks after Cigna turned down a $47.5 billion offer by Anthem, which runs Blue Cross Blue Shield, and publicly rebuked its suitor over security issues and future uncertainty.

[Also: Cigna turns down takeover deal from Anthem]

"You are, however, facing a number of major issues, including Anthem's lack of a growth strategy, complications relating to your membership in the Blue Cross Blue Shield Association and the related antitrust actions, and other significant challenges, such as the massive data breach you experienced in February," Cigna chairman Isaiah Harris and CEO David Cordani in a public letter to Anthem in June.

The $188 per share offer is slightly more than the $184 a share Anthem offered in June.

Correction: An earlier version of this story listed the takeover price at $48 billion, based on reports, but Anthem in its statement said the price would be $54.2 billion.

Twitter: @HenryPowderly