Cigna Terminates Merger Deal With Anthem, Sues Insurer For $13 Billion


Cigna said it was disappointed in the outcome, but that it had met its obligations under its agreement with Anthem.

In a lawsuit filed Wednesday in Delaware Court of Chancery, Anthem said there was still a "viable path forward" to completing the merger even though Cigna announced Tuesday it had exercised its right to terminate the deal. But Anthem and Cigna battled each other over the fate of their planned $48 billion transaction.

Each of the companies, Aetna, Humana, Cigna and Anthem, carries a Zacks Rank # 3 (Hold).

There is no evidence, however, that the Trump Administration would support insurer consolidation.

Analysts have speculated that Humana, which is strong in the Medicare Advantage business of selling private Medicare plans, could now be targeted in a future deal, by either Anthem or Cigna. Cigna further argues that since such an action constitutes "willful breach" of the merger agreement, Cigna is entitled to compensation in excess of the $1.85 billion termination fee, according to the note. "Cigna believes Anthem's allegations to be meritless".

When she sued all four companies previous year to block the two mergers, then-Attorney General Loretta Lynch said the combinations ran the risk of "drastically constricting competition" in health care.

Aetna and Humana haven't yet made a decision to appeal the court order blocking their merger, but Anthem immediately filed an appeal with the U.S. Court of Appeals for the District of Columbia Circuit.

"But", he said, "we would consider the probability and the timing of completing a transaction as an important input to that, considering the environment that we're in today and considering ... just the process we've gone through".

However, Cigna "vigorously" disagrees, it noted in its Q&A document. Anthem's shares closed down less than 1 percent at $163.32 while Cigna rose less than 1 percent to $146.68.

The District Court said that the merger would decrease competition and lessen choice in the "national accounts" market. That prompted the counter suit from Anthem to keep the merger alive. When asked by a Justice Department lawyer if Anthem's intent was to allow Cigna to "wither away", an Anthem executive responded "absolutely not".

But the American Medical Association said last week, after the Anthem-Cigna deal was shot down, that a merger would have created a health care behemoth too large to regulate and with too much control over the lives of consumers.