Icahn Backs Down on Cigna Deal -- WSJ

By Cara Lombardo

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 14, 2018).

Carl Icahn no longer plans to solicit votes from Cigna Corp. shareholders against the health insurer's $54 billion deal to buy Express Scripts Holding Co. after two proxy-advisory firms recommended shareholders support the deal, the billionaire activist investor said in a statement Monday.

Significant shareholder overlap between the two companies, which he initially hoped had decreased since the deal was announced, was also a factor in his decision, he said.

Even before proxy advisers Institutional Shareholder Services and Glass Lewis recommended in recent days that shareholders support the deal, Mr. Icahn faced an uphill battle. He didn't publicly criticize the deal until well after the record date, which meant he couldn't recruit others to jump in and oppose it.

And his position in Cigna amounted to about 0.56% of the company, so he would have needed to win a lot of support. He also held a short position in Express Scripts, which meant he was betting on the stock losing value.

Another prominent hedge fund, Glenview Capital Management LLC, came out last week in support of the deal. The fund, which has a $1.3 billion stake split between the two companies, said the deal would save the companies' customers "billions of incremental dollars annually."

Cigna has said Mr. Icahn doesn't understand the dynamics of health care and appeared to be betting against the deal for a profit. It called his opposition "misguided and shortsighted" in a statement last week.

Mr. Icahn said in his statement that he informed the Securities and Exchange Commission he will no longer solicit proxies to vote against the transaction.

Shareholders of both companies are set to vote on the deal Aug. 24.

Proxy-advisory firms' opinions hold significant sway with shareholders. The firms rarely recommend their clients, which include major institutional investors, vote against proposed mergers. And big institutional shareholders often vote in line with the proxy-advisory firms' opinions.

Mr. Icahn's concerns about the deal included competitive risk from Amazon.com Inc. and indications from the Trump administration that it could limit the manufacturer rebates pharmacy-benefit managers like Express Scripts receive.

Cigna and Express Scripts have said their merger, announced in March, will expand their health-care offerings and help them control costs. The deal comes amid a furious round of consolidation as health-care companies seek to position themselves to provide more cost-effective care and fend off heightened competition from Amazon.com Inc. and others.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

August 14, 2018 02:47 ET (06:47 GMT)

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