Collapsed Cigna and Anthem Merger Goes To Court

Earlier this month, the health insurance organisation Cigna Corp. announced the termination of its $54bn merger agreement with insurance company Anthem Inc. The deal has taken a further complicated turn, after Cigna announced that it had filed a lawsuit against Anthem seeking a $1.85bn termination fee, plus a staggering $13bn in damages. In an interesting twist, Anthem has launched its own lawsuit against Cigna, claiming the company has sabotaged the merger in its attempts to breach the agreement and collapse the $48bn deal.

As failed deals go, this one is certainly becoming very messy.

The dispute has arisen from a US District Court ruling blocking Anthem’s purchase of Cigna, citing that the merger would decrease competition and ultimately consumer choice. Anthem, however, is appealing the ruling and seeking an extension of the merger agreement until April. In the meantime, Anthem has requested a temporary restraining order against Cigna.

Claims by Anthem suggest that Cigna has deliberately attempted to sabotage the purchase, by delaying data production and integration plans, as well as a less than satisfactory performance when defending the merger in front of the US District Court. Coincidentally, the fallout came less than 24 hours after fellow insurance industry giants Aetna and Humana agreed to terminate their merger after another US district judge blocked their own deal.

Firing back at Cigna is a bold move for Anthem, however the animosity between both parties is palpably clear, not least because of Anthem’s request of a restraining order against Cigna. Anthem CEO Joseph Swedish suggested that “if not overturned, the consequences of this decision will hurt American consumers”, while it is rumoured that Cigna has the cash to make an acquisition of its own following the collapse of the merger, suggesting that perhaps one party feels more strongly about the failed deal than the other.

Commenting on the collapsed deal, antitrust attorney Matthew Cantor hinted that the deal breakdown may be down to Anthem and Cigna expending energy disagreeing with each other, rather than uniting and making their joint case to the authorities to push the deal through.

If the merger agreement is extended until April, both parties now have more time to carefully consider their next move. At this stage it seems unlikely that the deal will go ahead, however, with the similar collapse of the Aetna and Humana deal there is ample opportunity for M&A activity in the health insurance sector, and both Anthem and Cigna will be well positioned to approach new targets.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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