Cigna sues Anthem to end merger deal, seeks $1.85 billion break-up fee, $13 billion in damages

Cigna sues Anthem to end merger deal, seeks $1.85 billion break-up fee, $13 billion in damages
Cigna sues Anthem to end merger deal, seeks $1.85 billion break-up fee, $13 billion in damages

Cigna said Tuesday in a lawsuit that it is looking to terminate its merger agreement with Anthem, and seeks a $1.85 billion break-up fee and additional damages exceeding $13 billion.

Cigna's suit comes in the wake of a federal court's decision blocking the planned $54 billion merger between the two insurers — a deal Cigna argues is effectively dead.

"In light of the Court's ruling, Cigna believes that the transaction cannot and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna's shareholders," the Connecticut-based insurer said in a statement.

Cigna added it filed its suit in the Delaware Court of Chancery to seek a judgment that it "has lawfully terminated the merger agreement and that Anthem is not permitted to extend the termination date."

Shares of Anthem closed down slightly at $163.32, while Cigna shares edged modestly higher to close at $146.68.

Anthem is the nation's largest Blue Cross insurer, and Cigna claims that Anthem put the interests of the Blue Cross Blue Shield Association ahead of their deal, and as a result Cigna shareholders lost out during the prolonged merger process.

Anthem and Cigna's relationship has been contentious since they began having merger discussions early in 2015. During their antitrust review, attorneys from the Department of Justice introduced correspondence between the insurers accusing one another of not living up to their merger agreement.

The federal judge who ruled against the companies' merger, noted that testimony by Cigna executives during their antitrust trial was at odds with Anthem's arguments in the case, and called their clear animosity during the proceedings "the elephant in the courtroom."

In response to Cigna's suit, an Anthem spokeswoman said that their merger agreement remains in effect for another 2 ½ months.

"On January 18, 2017 Anthem extended its Merger Agreement with Cigna through April 30, 2017. Under the terms of the Merger Agreement, Cigna does not have a right to terminate the agreement," said Anthem spokeswoman Bonnie Jacobs, in a statement. "Therefore, Cigna's purported termination of the Merger Agreement is invalid. Anthem will continue to enforce its rights under the Merger Agreement and remains committed to closing the transaction."

After last week's ruling, Anthem said it would pursue an expedited appeal of the judge's decision to block the merger.

The acrimonious break-up notice from Cigna came hours after Aetna and Humana agreed to mutually terminate their $34 billion merger agreement, after their deal was also blocked in federal court. Aetna has agreed to pay Humana the $1 billion break-up fee stipulated in their agreement, saying that after 19 months of trying to gain approval it was in the best interest for the two to move on.

CNBC

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