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Analyst downgrades Coventry shares to 'neutral'

Shares of Coventry Health Care Inc. have a limited upside as the health insurer waits for the close of its pending acquisition by fellow insurer Aetna Inc., according to a Citi analyst who covers the managed care sector.

THE OPINION: Last month Aetna, the nation's third largest insurer, said it would buy Coventry, a Medicaid and Medicare coverage provider, in a deal valued at $5.7 billion.

Aetna, based in Hartford, Conn., will pay $42.08 for each share of Coventry stock. That includes $27.30 in cash and a portion of its stock. The price represented a 20 percent premium on Coventry's closing price of $34.94 the last trading day before the deal was announced.

Coventry is based in Bethesda, Md.

Analyst Carl McDonald said Monday in a research note that the amount of upside or growth potential in Coventry shares is limited because 65 percent of the deal price is in cash.

"We don't anticipate any new bidders emerging for Coventry since most large plans are already locked into other deals or would have significant anti-trust considerations," he wrote.

McDonald lowered his rating on Coventry shares to "neutral" from "buy."

THE STOCK: Up 12 cents to $41.85 Monday morning after rising as high as $42.29 in earlier trading, matching their 52-week high reached Aug. 20.

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