Discord Clouds Future Of Anthem-Cigna Deal -- WSJ
February 10 2017 - 3:03AM
Dow Jones News
Anthem appeals antitrust ruling against its acquisition of
competitor Cigna
By Anna Wilde Mathews
Anthem Inc. on Thursday appealed a federal judge's decision to
block its acquisition of Cigna Corp., but the future of the deal
was unclear amid discord between the two partners.
On Wednesday, U.S. District Judge Amy Berman Jackson said the
proposed $48 billion deal between the two health insurers violated
federal antitrust law because it would create an unacceptable
reduction in the number of companies able to serve large multistate
employers that offer insurance to their workers.
A Cigna spokesman declined to comment on the appeal beyond an
earlier statement that said the company "intends to carefully
review the opinion and evaluate its options in accordance with the
merger agreement."
Cigna previously appeared to question whether Anthem had the
right to unilaterally extend their merger agreement to April 30,
which Anthem said it did in January. In a filing last week, Cigna
said it had "made no determination with respect to Anthem's notice
seeking to extend the termination date, including whether Cigna
will seek to terminate the merger agreement, and has informed
Anthem that it is reserving all of its rights in this regard."
Anthem will face long odds in attempting to get an appeal done
by April 30, and it still needs state approvals to close the
deal.
The merger agreement calls for Cigna to receive a $1.85 billion
breakup fee from Anthem if the deal dies, and analysts have
suggested that the two companies would likely be headed toward a
new chapter of hostilities in the event of a negative antitrust
decision.
In a statement, Anthem Chief Executive Joseph R. Swedish said
the company was "significantly disappointed by the decision as
combining Anthem and Cigna would positively impact the health and
well-being of millions of Americans," and it "will continue to work
aggressively to complete the transaction."
The judge's ruling said the combination "is likely to result in
higher prices, and that it will have other anticompetitive effects:
it will eliminate the two firms' vigorous competition against each
other for national accounts, reduce the number of national carriers
available to respond to solicitations in the future, and diminish
the prospects for innovation in the market."
The decision also highlighted the obvious signs of disagreement
between Anthem and Cigna, which had originally announced their
combination amid an industry merger frenzy in 2015.
The companies squabbled during the Justice Department's review
of the transaction and eventually accused each other of violating
the merger agreement.
During trial proceedings that began in November, Anthem mounted
a legal defense of the merger single-handedly. Cigna lawyers said
very little during the proceedings, and when they did, it usually
didn't help Anthem's position. Judge Jackson in her ruling called
the rift "the elephant in the courtroom."
"Anthem urges the court to look away, and it attempts to
minimize the merging parties' differences as a 'side issue,' a mere
'rift between the CEOs.' But the court cannot properly ignore the
remarkable circumstances that have unfolded both before and during
the trial," the judge wrote.
According to the two companies' merger agreement, the deal's
termination date "may be extended by Anthem or Cigna, by written
notice to the other party, to a date not later than April 30,
2017."
The agreement says Anthem will have to pay the $1.85 billion if
the deal is blocked on regulatory grounds, but only once a decision
has become "final and non-appealable." The agreement also says the
fee won't be owed if the regulatory failure comes because of
"Cigna's willful breach of its obligations to complete the
mergers."
The agreement says that the right to terminate the deal "shall
not be available to any party that has failed to perform fully its
obligations under this agreement in any manner that shall have
proximately caused or resulted in the failure of the merger to have
been consummated."
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
February 10, 2017 02:48 ET (07:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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