Delaware Judge Frees Cigna to Exit Anthem Merger -- 2nd Update
May 11 2017 - 7:00PM
Dow Jones News
By Brent Kendall, Anna Wilde Mathews and Peg Brickley
WILMINGTON, Del. -- A judge here on Thursday freed health
insurer Cigna Corp. to abandon its proposed $48 billion merger with
Anthem Inc., declining to give Anthem more time to try to salvage
the deal, which federal courts have blocked on antitrust
grounds.
The development could spell the end for a long-troubled deal in
which the two companies have accused one another of violating their
merger agreement.
The Justice Department filed an antitrust lawsuit against the
deal last year. A federal judge blocked the deal in February and an
appeals court also ruled against Anthem last month. But Anthem
sought to press forward and recently asked the U.S. Supreme Court
to intervene, a request that faced long odds.
Separate from the federal antitrust case, Anthem and Cigna have
sued one another in Delaware, and Anthem wanted Vice Chancellor J.
Travis Laster, a judge on the Delaware Chancery Court, to issue an
injunction that would have prevented Cigna from terminating the
deal, at least for now.
Judge Laster in a Thursday afternoon hearing denied Anthem's
injunction request, saying the company's chances of saving the
merger were remote.
In a statement, Cigna confirmed the judge's decision and said,
"We look forward to closing this final chapter." Anthem didn't
immediately respond to a request for comment.
The judge stayed the ruling for 24 hours so Anthem can seek
appellate review if it wishes.
During a lengthy court hearing on Monday, Anthem had argued to
Judge Laster that Cigna had sabotaged the deal and shouldn't be
able to kill the transaction while Anthem made one more push to
save it.
Anthem said it had a realistic shot at overcoming antitrust
hurdles, either through its Supreme Court appeal or perhaps through
negotiations with Trump administration antitrust officials taking
the reins at the Justice Department.
Cigna, for its part, had said the deal had no realistic legal
path forward after federal court rulings found the merger would
unlawfully suppress competition. And it disputed Anthem's
allegations of sabotage.
While Cigna prevailed Thursday with the denial of injunction,
Judge Laster made comments that could hurt the company down the
line. He said Anthem may have a strong case that Cigna didn't live
up to its contractual commitment to give its best efforts to fight
for the deal.
The judge said Anthem at some point may have a chance to collect
a large monetary damages award against Cigna.
"Money can't fix everything, but it can help a lot," the judge
said in court. "At this point, in my view, a damages award is the
only realistic form of relief."
A long and bitter legal road could lie ahead as each side
accuses the other of violating the deal's terms and seeks a big
payout in damages. Cigna wants a $1.85 billion breakup fee from
Anthem, as called for in the merger agreement, plus more than $13
billion in damages.
Anthem argues that Cigna isn't entitled to the breakup fee and
it is seeking an unspecified amount of damages "for all forms of
loss" that it alleges were caused by Cigna.
The federal antitrust trial on the merger was the most unusual
in recent memory. Acrimony between the companies already was high
by the time the Justice Department's case against the merger went
to trial last November.
Anthem mounted a legal defense of the merger largely alone, with
Cigna lawyers saying little in court. On the rare occasions when
the Cigna team did speak, it usually didn't help Anthem's
position.
When U.S. District Judge Amy Berman Jackson blocked the deal in
February, she said the proposed merger would create an unacceptable
reduction in the number of companies able to serve large multistate
employers that insure their workers.
She also called the companies' rift "the elephant in the
courtroom," saying she couldn't "properly ignore the remarkable
circumstances that have unfolded both before and during the
trial."
Write to Brent Kendall at brent.kendall@wsj.com, Anna Wilde
Mathews at anna.mathews@wsj.com and Peg Brickley at
peg.brickley@wsj.com
(END) Dow Jones Newswires
May 11, 2017 18:45 ET (22:45 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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