Anthem sues Cigna to block termination of merger

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By Michael Erman

<span class="articleLocation”>Anthem Inc said on Wednesday it filed a
lawsuit to block smaller rival Cigna Corp from officially
terminating their proposed $54 billion merger, a transaction
already rejected by U.S. antitrust regulators.

The deal would have created the largest U.S. health insurer. Rivals Aetna Inc and Humana Inc had sought
their own merger, representing an unprecedented consolidation
among U.S. health insurers.

In separate rulings, federal judges struck down both deals
as anticompetitive, at the request of the Justice
Department. Aetna and Humana said on Tuesday they
were ending their deal, but Anthem filed an appeal of its
ruling.

Cigna, however, said on Tuesday it notified Anthem it had
ended the deal and that Anthem was required to pay a $1.85
billion break-up fee under their agreement.

Cigna also filed a lawsuit in Delaware, seeking legal
sanction for its decision to end the deal and approval for $13
billion in damages for its shareholders who did not receive the
takeover premium.

Anthem’s lawsuit, which was also filed in Delaware, seeks a
temporary restraining order to prevent Cigna from ending the
deal, arguing there is still enough time to complete the
transaction first announced in July 2015.

“Cigna’s lawsuit and purported termination is the next step
in Cigna’s campaign to sabotage the merger and to try to deflect
attention from its repeated willful breaches of the Merger
Agreement in support of such effort,” Anthem said.

Cigna said on Wednesday that it believed Anthem’s
allegations were meritless.

Anthem said it was pursuing an expedited appeal of the court
decision and remained committed to complete the merger either
through a successful appeal or through a settlement with the new
leadership at the Justice Department under the Trump
administration.

Cigna maintains that Anthem had not done enough to reduce
potential anticompetitive elements on its side of the
transaction, and would not be able to make those changes in time
to secure regulatory approval.

“Accordingly, there is no viable path to completing this
transaction,” Cigna said.

Cigna had increased its share repurchase program to $3.7
billion, but said on Tuesday it would limit the share repurchase
amount to $250 million per quarter. Some analysts questioned
whether this signaled a new intent by the insurer to seek an
acquisition.

“We believe this suggests Cigna was looking to deploy the
capital in another way, potentially M&A, but we are hesitant to
suggest another public-public merger offer,” Piper Jaffray
analyst Sarah James said in a client note.



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