Cigna ended its merger agreement with Anthem and said it will seek $14.8 billion after breakup

Cigna and Anthem

Cigna ended its merger agreement with Anthem on Tuesday and said it will seek $13 billion in damages from Anthem on top of the $1.85 billion break-up fee outlined in the deal. 

The Bloomfield, Conn.-based insurer said the planned $54 billion merger, which was blocked by a federal district court last week on anti-competitive grounds, “cannot and will not achieve regulatory approval” and that calling it off is best for its shareholders. 

Cigna alleged that Anthem “willfully breached” the merger agreement in a way that made it unlikely the deal would be approved and has harmed Cigna's shareholders.

Cigna said it filed a lawsuit against Anthem in the Delaware Court of Chancery seeking full payment of the break-up fee and an amount exceeding $13 billion, because that's what Cigna shareholders did not obtain as a result of the merger falling through, the insurer said. Cigna is also seeking declaratory judgment that it lawfully terminated the agreement and that Anthem cannot extend the agreement further. 

Last month before the district court ruling, Anthem announced that it extended its merger agreement with Cigna through April 30 because it anticipated needing more time to gain approval. Cigna said it would evaluate its options once the court ruled. 

In a statement Tuesday, Anthem argued that Cigna's “purported termination of the merger agreement is invalid” because it does not have the right to terminate the agreement. On Wednesday, Anthem announced that it was seeking a restraining order against Cigna, which had been attempting to "sabotage" the deal throughout the process.

Anthem offered details inside the fraught relationship between leadership of the two insurance giants. In a press release Wednesday, Anthem accuses Cigna of failing to provide top leadership to conduct meetings about the merger, working with the Department of Justice to obtain correspondence that Anthem had breached the contract agreement, and hindering expedited review of Anthem's appeal of the federal judge's decision.

Anthem said it remains committed to closing the deal. The Indianapolis-based insurer has already filed a notice to appeal the district court's move to block the merger. 

The dispute is the culmination of months of squabbles and a deteriorating relationship between Anthem and Cigna executives that ultimately factored in to U.S. District Court Judge Amy Berman Jackson's decision. 

In her 12-page order, Jackson said Cigna officials were “actively warning against” the merger by presenting evidence and testimony that undermined the projections of future savings that would result from the combination. Jackson said the rifts between the CEOs and the deep disagreements in strategy couldn't be ignored. 

Analysts expected that Anthem wouldn't pay with the break-up fee without a fight. Matthew Cantor, an antitrust attorney with Constantine Cannon, previously told Modern Healthcare that Anthem may argue that Cigna hasn't done enough to see the merger through and doesn't deserve the break-up payment. Cigna, however, wouldn't give it up easily, and the two could likely end up back in court, he said. 

Also on Tuesday, Aetna and Humana announced they had terminated their $37 billion merger following a U.S. District Court judge's ruling against the deal.

Aetna will not seek an appeal and instead will pay Humana $1 billion to terminate the agreement. Aetna will also pay Molina Healthcare a breakup fee to end their agreement. Aetna had agreed to sell Molina some of its Medicare Advantage plans to win court approval for the Humana deal.

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Rob Myers
By Rob Myers 02/15/2017 10:37:00