Judge blocks Cigna from scuttling $48B Anthem deal
Anthem won a court ruling temporarily blocking Cigna from scuttling a $48 billion merger between the health insurers.
Delaware Chancery Court Judge Travis Laster concluded Wednesday Cigna executives couldn’t summarily pull out of the combination after a federal judge last week blocked the merger of the insurers as anti-competitive. He found a temporary ban would protect the “legal status quo” of the deal until he could weigh arguments over the faltering merger at an April 10 hearing.
The ruling is the latest twist in what promises to be a fierce legal battle over the deal’s failure. Cigna on Tuesday told Anthem it was terminating the merger agreement and filed a lawsuit in Delaware seeking a $1.85 billion break-up fee and $13 billion in damages from Anthem. That prompted the counter suit from Anthem in the same court to keep the merger alive.
With Cigna prevented from terminating the deal, Anthem is free to pursue an appeal in federal court in Washington seeking to overturn a February 8 order that the merger of the insurers would threaten competition and should be stopped. Anthem wants a fast-track review by the appeals court so it can get a decision by an April 30 deal deadline.
Cigna’s attempts to immediately abandon the deal threatened Anthem with significant harm through “the loss of a major transaction,” Laster said in a telephonic hearing. He added that Cigna’s announcement that it was reneging on the deal “has real-world consequences.”
Anthem and Cigna didn’t respond to requests for comment.
The Anthem-Cigna merger is one of two insurer tie-ups that were blocked following challenges by the Justice Department last year. The other, between Aetna and Humana, was abandoned by the companies on Tuesday after they decided against an appeal.
The Justice Department’s antitrust division sued in July 2016 to block the Anthem-Cigna tie-up, saying the combination would further consolidate an already concentrated market, leading to higher costs for employers who buy insurance plans from the companies for their workers.
U.S. District Judge Amy Berman Jackson backed the government’s position last week. She also noted that the deal was riven with discord between the two companies, which she said undermined their justification for the combination.
The conflict between the companies has been evident since last year when the Justice Department made public that the two had accused one another of breaching their deal. Testimony during the trial by the chief executive officers of the companies underscored their rift.
Cigna’s David Cordani revealed his doubts about the benefits of the merger, and Anthem’s Joseph Swedish disclosed his company had created a secret team to plan its integration while keeping Cigna executives in the dark.
Anthem executives are pushing for the merger’s consummation even though they know it’s impossible to get antitrust clearance, William Savitt, one of Cigna’s lawyers, told the judge. “Anthem wants to keep Cigna on ice” so it can improve its competitive position in the health insurance market, Savitt said.
Anthem’s lawyer dismissed Savitt’s “conspiracy theory,” saying the insurer was merely seeking to hold its merger partner to the promises it made in the deal. “They are not on ice,” said Glenn Kurtz, an attorney representing Anthem. “They are out competing and trying to get more business.”
Cigna’s high-profile attempts to call off the deal also is causing problems with Anthem’s attempt to get a federal appeals court to quickly review the federal judge’s conclusion the merger will unfairly impact competition. Justice Department lawyers are saying there’s no need for a speedy appeals hearing “because the deal’s dead,” Kurtz added.
Kurtz also told the judge that Anthem executives were hoping that new lawyers brought into the Justice Department as a result of President Donald Trump’s election would have a different view of the deal’s effect on competition.
The cases are Anthem Inc. v. Cigna Corp., No. 2017-114, Delaware Chancery Court (Wilmington) and Cigna Corp. v. Anthem Inc., 2017-0109, Delaware Chancery Court (Wilmington).