Appeals Court Affirms Decision Blocking Anthem-Cigna Merger -- 2nd Update
April 28 2017 - 2:22PM
Dow Jones News
By Brent Kendall and Anna Wilde Mathews
WASHINGTON -- A federal appeals court on Friday declined to
allow health insurer Anthem Inc. to acquire Cigna Corp., affirming
a trial judge's recent ruling that blocked the deal on antitrust
grounds.
The decision is another major legal blow to Anthem's effort to
salvage a $48 billion transaction that already was on its last
legs.
A three-judge panel of the U.S. Court of Appeals for the
District of Columbia Circuit, in a divided ruling, rejected
Anthem's argument that the trial court had failed to sufficiently
weigh the company's claim that billions of dollars in cost savings
would flow from the merger.
"The district court reasonably determined Anthem failed to show
the kind of extraordinary efficiencies that would be needed to
constrain likely price increases in this highly concentrated
market, and to mitigate the threatened loss of innovation," Judge
Judith Rogers wrote for the majority
Anthem and Cigna agreed to the deal in July 2015. The Justice
Department spent a year reviewing the proposed merger before filing
an antitrust lawsuit to challenge it.
The appeals court was reviewing a judgment by U.S. District
Judge Amy Berman Jackson in Washington, D.C., who held a month-long
trial at the end of 2016 and ruled against Anthem in February.
Judge Jackson found the merger would unlawfully suppress
competition among large health insurers, harming multistate
employers that already have only a few competing choices when
insuring their workers.
The litigation has played out amid acrimony between Anthem and
Cigna. The companies had been feuding even before the Justice
Department filed its lawsuit, with each company eventually accusing
the other of violating the merger agreement.
After Judge Jackson blocked the deal, Cigna and Anthem sued each
other in Delaware state court, where litigation continues. Cigna
tried to terminate the transaction in February but a Delaware judge
barred the company from doing so.
A hearing is scheduled for May 8 in the Delaware court, where
Cigna again will seek to opt out of the deal. Anthem has tried to
prevent the smaller insurer from walking away.
Cigna said in a regulatory filing that it was continuing to work
through the litigation process, and a spokesman declined to comment
beyond the filing.
An Anthem spokeswoman didn't immediately respond to a request
for comment. In a call earlier this week with analysts, Anthem
Chief Executive Joseph R. Swedish said that how the Delaware court
evaluated the situation would depend on the outcome in the
antitrust appeal, and the company would "have to judge our
go-forward position based on the decision of the appeals court." He
said then that Anthem remained committed to the deal.
The latest blow to Anthem's efforts to resuscitate the merger is
likely to turn the focus to the $1.85 billion breakup fee that
Cigna could be due to receive under the terms of the deal. Cigna,
in its Delaware lawsuit, seeks that fee as well as more than $13
billion in damages from its partner, which it alleges violated the
terms of their deal. Anthem, for its part, has argued that Cigna
sought to sabotage the deal, and its lawsuit also is claiming the
right to monetary damages from its merger partner.
Analysts have speculated that Cigna could use any money it
receives from Anthem, along with a substantial cash hoard it has
already accumulated, to engage in new deal-making of its own,
potentially eyeing newly single Humana Inc., which saw its own deal
to be acquired by Aetna Inc. blocked in court on antitrust
grounds.
Write to Brent Kendall at brent.kendall@wsj.com and Anna Wilde
Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
April 28, 2017 14:07 ET (18:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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