The first officers heard the gunshots and they still ran through that theater. They do an amazing job protecting us every single day. Im grateful for their heroism and i think well hear other stories from folks inside the theaters as details come out. Were switching gears this morning. We have breaking news right now. It is now official anthem is buying cigna for 188 in cash and stocks. The transaction valued at 54. 2 billion on an enterprise basis. This of course, a transaction thats been long in the making. Weve talked about it over and over as other deals have come and gone. Weve seen etna now merge with humana. There will be issues and questions in washington about regulatory questions, about consolidation. Just to give you a couple quick breakdowns, its 143 per share in cash 0. 5152 shares in anthem stock. You might remember this deal was held up for at least a bit because of questions about the roles of the different ceos in this. Questions about what was going to happen to David Cordani who had been holding up for perhaps a different job, in this case joseph swedish is going the be serving as the chairman and ceo of the combined company. David cordani will be the president and ceo of the chief operating officer. They say they will be expanding to 14 members and mr. Cordani will be joining them along with more independent members. When you really look at this deal from a premium perspective, you remember this did leak early, but if you really go on an unaffected basis, were talking about 38. 4 premium to cignas Closing Price back on may 28th 2015. That was the day before news of this transaction first leaked. Under terms of the transaction, the consideration is going to be about 55 45 anthem shares. When you think about the split, however, between control if you will anthem shareholders will control about 67 of the company, 33 of that held by cigna shareholders. One other piece i was just looking, its a really i mean its huge when you think about how many millions of people this company is going to be connected to. 50 Million People. So it has a huge huge impact in terms of the country and what it does. Of course, thats one of the reasons that regulators well and what do you think actually happened in washington . Thats the big question on this. To this point, people assumed these deals would go through. But taking five Major Health Insurers and swishing that down to three has to result in all kinds of questions about competition. Im not worried about this level of competition at all. These krps being forced to get together because the amount of care that theyre expected to provide right now is absolutely impossible given the amount of subsidies and youre seeing 30 and 40 requests for increases based on obamacare. If they cant cut 2 billion 6 Million People are coming in and for whatever reason what theyre taking is not covering the cost of care that theyre providing. We knew this was going to be an issue. Its being forced by obamacare. If they can save 2 billion, theyre in a better position to provide the care without raising the ire of government officials that say youre trying to get a 30 and 40 rate increase. Completely and completely changes the balance, though when it comes to the hospitals and the doctors who are working with these insurers and hoping for equal care on the same side. Theres been massive hospital consolidation, but you would think that wouldnt even keep up. I dont look at it as oh my god. Theres no way the single Insurance Companies are going to be able to control the market to raise prices in a noncompetitive fashion to pad their profits because the problem on the expense side of things is so big that its forcing them to do this in the first place. But you eventually get to a single Provider Health care system i guess is the question. I dont know. I mean i heard i dont know. But i dont see this as an offensive move. I see this as a defensive move. Being thrust upon these the question is going to be regulators cant all of a sudden come and say you cant do this after the action is what forced them to do this in the first place. You wrote one of your columns about that. The question is going to be whether the savings, if you will, get passed on to the customer or not. That is the question. You should know, by the way, combined thats not what it is, either. With the savings, you mean theyre going the try and keep premiums as low as they possibly can to provide the care that theyre trying to do. Im not telling you the transaction is a problem yet. Im just telling you that theres a question. What do you mean savings passed its barely here is what im trying to tell you. Theyre saying theyre going to drive adjusted earnings per share increased and up 10 in one year with that more than doubling in two years. Its to try and hold premium increases down. Theyre not going to pass on savings to customers. These are the companies expected on the exchanges to provide the insurance coverage. And youve heard all week long that the pocket expense, deductibles are higher. Well see what finally happens. Theres an election coming up. I dont know if you some laugh about obamacare because of the number of people being insured is going down but the final verdict knot in on what this is going to do to our system. Some of the folks that own the debt they are going to be a cash component, they are going to be getting some money. They received financing commitment from bank of america, Credit Suisse and ubs. They say theyre hoping to retain their confidence over Investment Grade debt rating. They say the close of the transaction should happen in the second half of 2016 after, of course, all these regulatory hurdles and questions are ironed out and that they would bring that after that it would bring the ratio in terms of the debt to capital ratio down to a low 40 range. At the same time, cigna put out a press release talking about what it sees for its Second Quarter results plus raising the outlook for 2015. And i guess thats a question, too. Its weird. Theyre coming in with higher numbers, theyre now looking at Second Quarter 2015 expected to be at least 6350 million or 250 a share. Thats compared to you know its going to be a political football. This is the point its going to be a political football. You cant say your business is getting better. You either have to say your business is going to hell in a hand basket and thats why we have to merge because youve completely screwed us up or life is great. Obamacare handed these Insurance Companies a plum opportunity to make a lot of money. So now that theyre in a position where they are this plum opportunity to make a lot of opportunity i dont understand. Its either a plum opportunity or a its a plum opportunity because theyre the ones that are going to to have to theyre in a position where theyre going to have to provide the insurance. They werent Government Entities which they wanted to set up. There wasnt a Government Entity to do it. Theyre going to do it but if they dont merge, you know youre going to see premiums go up 30 and 40 . Theyre going to but bird res going to fly and fish are going to swim. Theres always this tension between we talk about it all the time. These are not not for profit that is going to be the difficulty in washington. Saying i need a its going to be a political football. Exactly. I like this story with amazon is one that we can talk about. Just because of the numbers that were dealing with here check it out. Amazon shares surging after the Company Posted earnings of 19 cents a share. The street had been looking for a loss of 14 cents. Revenue also topped consensus in the Current Quarter forecast is bullish. The big driver amazons Cloud Computing services is all good news for shareholders. A big win for the ecommerce giant ceo. In less than an hour of trading, jeff bezos became 7 billion richer. The difference between makinged 92 million and losing 92 million on what was the revenue number . 23 billion. 23 billion. Look at the profit margins. When you look at it if you do a decimal point difference in what they were able to bring to the bottom line its so minute it reminded me of when they do the jobs numbers where theres millions of jobs and, you know tens of millions of jobs involved and you finally look down and it looks like a net gain of 200,000. Its a rounding almost. Right. But then so i multi flied thats the opportunity. Is it . I multiplied 92 billion times four. 92 million . 92 million. Times four. That is like 270 and then the market cap is almost 300 billion. Just to see if i could get a price earnings. I think they would prefer not to make a profit because then you say its infinite pe. So this was a big surprise. Everybody loves it. Because it defines the company thats trading at a thousand times earnings. Price certainings, 994 times. So its you know so now you can define what the pe. Because theres a profit. Id rather say, they dont make a profit. Trust us trust us its going the pay off big. They turn the screws there and they can change wall streets perception drastically. Thats whats amazing. You look at the masses, the billions. 224 billion dollar market cap. God bless him. You know, i would certainly that probably doesnt include yesterdays gain. Jon if that 224 includes yesterdays gain. I dont know if they what do they have . There it is, 262. 42. Pretty amazing. Yeah. Not sure we would have jeff bezos laughing today. Do we have that queued up . All the way to the bank . Well i mean there we go. How much did his net worth go up to yesterday . 7 billion. 7 billion . Yeah. You know you can tell thats old because he still had he was still doing it with the hair back then. Now he accepted reality. Here or cojack. Inside the numbers, gene munster. Senior research an list at piper. Gene, more and more people use it. Revenue, maybe the revenue number being up 20 was the real catalyst, not necessarily the 92 billion 92 million in profit. That was more thats responsible for the pricing move probably. I think youre absolutely right. The Margin Expansion story has been going on for a couple of quarters now. That continued and that was kind of double what analysts were expecting. But thats part of the narrative thats happened. Aus mentioned the big kicker here that has just put some real oxygen behind there stock is their unit growth has accelerated from 20 to 22 , which doesnt sound like much. But when you put in the context the last time the unit growth grew was 2012. That changes the dynamic because you get the force of upward margin plus accelerating unit growth and thats a rail combination and thats why the stock is doing what its doing this morning. Four times jack welch. Four times 92 is 36. Yeah 36. Thanks jack. Still sharp. Hes got his clakter there. I think he can do that in his head. Im not so sure any more. Anyway thats pretty good. Youve been positive on this, gene . Well yeah. Weve had a lot that weve gotten wrong, but weve been working in the right direction on this one. So the profitability played out. Were hoping for the acceleration in units. And i think the important part of the stone story is that this can continue. And the reason theyve added we estimate about 20 million prime users over the last year. Theyve basically gone from around 30 million to 50 million. Each prime user spends about three times as much as a prime user. You start to get the compounding factor of that over years, thats the reason to stay positive on this. Like a tale of two cities. But what happened with apple the other day and what happened with amazon both on nuanced. Nothing that i mean if either one reacted the other way, no one would be surprised. You never know what is actually going to happen with these things, do you . It depends on how far the stock has come and sentiment and everything else. Apple everything was great and it lost how much in margin cap . 60. And then you know and how profitable apple is. And then you look at this. They barely got a profit and its the same story, only trading higher. I think one of the factors that the slight differences is that in apples case, people look forward fort next 12 months theyre not too excited about the next big cycle. But amazons case when you look forward to the next decade its easier to get comfortable. And i think thats why you have these big moves. I really like what we did there. We had this ready to go and google was the other one. Wait a second, i thought apple was a 60 billion loss. Not 31. Yeah apple yeah lost i dont know. I think maybe it opened there and because it did in the jobs. It opened at 122 and was up to 125 or all right. So, you know watching amazon over the years, a lot of people just have put their faith in bezos that he knows what hes doing in terms of getting more and more people just collecting users before profitability. Do you think this is an outlooker or is it now a company that operates in the black . Well i think you never can rest easy with amazon because theyre such big picture, make such big betts. But one of the things that the cfo said in the Conference Call is the steam will continue to focus on productivity which basically means hope for greater margins in the future continues to be a focus. I would put it this way. It feels like the margins over the next few quarters will continue to move higher. But to say we can rest easy for the next few years on that i think is a fools bet. To take over the world for amazon what do they still need to do . They still need where do they need warehouses around . Are they eventually going to have you know one hour drone delivery in every on every continent from the warehouse . Probably. I think maybe before that its going to be the same day push. And thats been the one weapon that traditional retailers have had against amazon is the ability for you to walk in the store and get it right away. So what theyve done is ramped up in the last year and a half the number of cities. Its gone from 6 to 13 that offers same day. You think thats probably going to be around 50 cities in the of course few years. So this concept of two day, everybody thinks of amazon as two day is going to morph to one day. Prime day, theyre going to launch in london soon and thats going to allow an hourly delivery. So the answer to your question is that the insatiable appetite of having every right now, theyre going to satisfy that and thats one of the reasons theyre going to gain market share in retail. We had a guy earlier this week who sold his business to amazon. He now thinks he will compete with amazon by offering lower prices and slower shipping does that make any sense to you . Theres a segment that makes some sense. I think its more of a competitor against costco. I think theyre going after a much more price conscious shopper. And so i would say that there is a segment for that that is price conscious and it does make sense. Ultimately, one of two things is going to happen with jet. Theyre going to be successful and amazon is going to buy them. My bet knowing the guy who founded it hes a winner and theyre going to be successful. So i wouldnt be surprised if amazon folds this in just like they did with diapers and zappos this is in the next few years. Stay close. Thank you. We have caterpillar and then you see google and amazon. Thats what the world is like, right there. We better move into the digital age. I think andrew is already there. Youre there. Ive got apple music. How is your apple music streaming going . I have like 12 im so confused. I dont know which reo album im listening to any more. But its starting to sound the same. Time to switch it up a little . Time to switch it up a little. Can you send me some good lady gaga albums . I dont have any lady gaga albums, but i could possibly. Are you on spotify . You guys figure this out and ill tell everybody else up next sir Martin Sorrell will be stopping by the squawk set to talk about advertising changes, whats happening with digital, whats happening with television advertising. And later this morning, the check out this lineup. Among our newsmakers, front Tier Communications executive maggie wilderotter, lynn doughtee. Hans bishop, as well. Stay tuned. Two streetlights. The only difference that little blue thingy. You see it . Thats a sensor. Using ge software, the light can react to its environment getting brighter only when its needed. In a night it saves a little energy. But, in a year it saves a lot. And the other street . Its been Burning Energy all night. For frank. Franks a cat. Now, two things that are exactly the same have never been more different. Ge software. Get connected. Get insights. Get optimized. Welcome back everyone. Digital ad spending jumped 21 from a year ago. Joining out right now, sir Martin Sorrell. He is the ceo of advertising giant wpp. There ways to celebrate and there are were celebrating your success. And becky is talking about the growth of digital whereas linear remains under pressure. For an old guy, you understand it, right . Very old guy, an aging guy. But we discussed that at some rally at one point. We did. I believe that off the record the no, themeatic is whats the future of tv . That was the biggest issue, which wasnt resolved what the was it . No. And we are watching massive amounts of money that are coming out of traditional forms of media spending and going into digital. Are you expecting that to continue . Its going to continue. Its 40 of our business now. If i went back to the year 2000 it was zero or close to zero. I would anticipate it would be well over 50 and the ability to differentiate between what is analog and what is digital is going to disappear. What does this mean for the old players . Are they losing out . What it means for us becky, is that 75 of the businesses don draper would never reckon. So our revenue is 20 billion. Media is 5. Data is 5. And digital is 6. So 16 out of 20 is nonmadmen stuff. Its just going to continue. And you see that i mean you see the amazon results last night. You see whats happening in generally in the online space. And the interesting thing about amazons results last night is the market cap has surpassed walmart. So is amazon alibaba flip cards or are they going to become the new walmart, tescos over the next 20 years . Were in the hunt for a data piece of tesco, which ironically was the data retailer. Theres just another sort of emblem attic change thats taking place in the data industry that we see. I guess my question is, i understand how it changes and how the ad agency has to keep up with