Anthem to Appeal Decision Against Cigna Deal
09 February 2017 - 11:35PM
Dow Jones News
By Anna Wilde Mathews
Anthem Inc. said it would appeal 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 insure their workers.
On Thursday, a Cigna spokesman declined to comment on Anthem's
announcement beyond a statement issued overnight that said the
company "intends to carefully review the opinion and evaluate its
options in accordance with the merger agreement."
Cigna has previously appeared to question whether Anthem had the
right to unilaterally extend their merger agreement to April 30,
which Anthem has said it did in January. In a filing last week,
Cigna said it "still intends to evaluate its options in accordance
with the merger agreement" and "has 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."
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
verdict.
Anthem said it "promptly intends to file a notice of appeal and
request an expedited hearing of its appeal to reverse the Court's
decision so that Anthem may move forward with the merger." 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 "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 singlehandedly. Cigna lawyers
said very little during the proceedings.
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 09, 2017 07:20 ET (12:20 GMT)
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