Payers, Legal

Anthem, Cigna won’t get anything from failed merger

A Delaware judge ruled on Monday that neither Anthem nor Cigna will be able to collect billions in damages over their failed merger.

handshake, break, deal

This post has been updated with a statement from Cigna.

The prolonged breakup between Cigna and Anthem is finally coming to a close. A Delaware Chancery Court judge ruled on Monday that neither company will be able to collect billions in damages they claimed over the failed merger.

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“Neither side can recover from the other. Each must deal independently with the consequences of their costly and ill-fated attempt to merge,” Chancery Court Judge Travis Laster wrote in his decision.

The two companies struck a merger agreement in 2015, a deal that would have created the largest health insurer in the U.S. Anthem, which manages several Blue Cross and Blue Shield affiliates, planned to buy Cigna for more than $54 billion.

Cigna CEO David Cordani would have started as president and COO of the combined entity, before eventually succeeding former Anthem head Joseph Swedish as the new company’s CEO.  But in the following year, as the companies began planning the combined entity’s organizational structure, “their relationship deteriorated profoundly.” Cordani faced reduced responsibilities and no clear path to succession, according to court documents.

Around that time, the U.S. Department of Justice sued to block the deal for antitrust reasons. In 2017, Cigna filed a suit against Anthem, seeking to terminate the merger agreement, while Anthem filed its own suit to keep the merger in place and appeal the DOJ’s lawsuit.

Cigna sought a $1.85 billion breakup fee and another $13 billion in damages for the loss to shareholders. Shortly after a Delaware appeals court ruled against the merger, Anthem called off the deal, but refused to pay the breakup fee. Anthem sought $21 billion, claiming Cigna sunk the deal on purpose by not pushing back on the DOJ’s opposition.

In the end, neither company will get anything.

“In this corporate soap opera, the members of executive teams at Anthem and Cigna played themselves,” Laster wrote.

While Anthem proved that Cigna breached its obligations under their contract, Cigna proved it was likely that the merger would have been blocked, anyways. Cigna failed to prove that Anthem breached its obligations, he noted in his decision.

“Each party must bear the losses it suffered as a result of their star-crossed venture.”

In an emailed statement, an Anthem spokesperson wrote that the company was satisfied with the court’s decision that Anthem wouldn’t have to pay a termination fee since Cigna had breached its obligation to do its best to get regulatory approval for the merger.

“We believe this decision is in the best interests of Anthem and our stakeholders,” the company stated.

Cigna, for its part, said it was pleased that the court agreed with its argument that Cigna did not cause the merger to fail.

“We continue to strongly believe in the merits of our case, and we are evaluating our options with respect to appeal,” a company spokesperson wrote in an email.

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