Anthem loses appeal over takeover of Cigna Corp

Bloomberg

Anthem Inc. failed to overturn a court ruling that blocked its planned takeover of rival Cigna Corp., capping a nearly two-year battle to complete a combination of two of the biggest health insurers in the US.
The federal appeals panel
in Washington upheld a lower court ruling by a 2-1 vote. The court rejected Anthem’s key
argument, that the medical savings resulting from a combination of the two companies were enough to offset any anticompetitive effects.
Cigna shares have been trading well below the value of the deal as investors have been skeptical of a reversal by the courts. They rose less than 1 percent to $156.37 after dropping as much as 2 percent following the appeals court decision. Anthem declined less than 1 percent to $177.89. Anthem, based in Indianapolis, said it was disappointed by the decision. “We are committed to completing the transaction and are currently reviewing the opinion and will carefully evaluate our options,” the insurer said in a written statement. Cigna didn’t respond to requests for comment.

BIG BLOW
The decision is a likely final blow to Anthem’s bid to complete the $48 billion merger, which a lower-court judge had said should be stopped because it risked undermining competition in health-insurance markets. The two companies have since sued one another, with Cigna seeking a $1.85 billion breakup fee and Anthem blaming its rival for undermining its legal defense of the deal.
Cigna can’t start pursuing other deals just yet, though. A Delaware judge has barred the company from walking away from the merger pending the results of a May 8 hearing. Rejection of that request would effectively set Cigna free.
Michael Newshel, an analyst with Evercore ISI, called the possibility of reviving the deal slim. “With the April 30 merger agreement expiration fast approaching, Anthem’s only inkling of hope now, if it isn’t prepared to definitely end things yet, is for a last-minute deal with DoJ under the new administration — but we think settlement is unlikely,” he said in a note to clients after the ruling. “Besides time, further barriers to a settlement include a lack of obvious remedy to anti-competitive concerns.”
Anthem told the Delaware court in an April 26 filing that there were “meaningful opportunities” to complete deal, saying it was seeking a settlement with the Justice Department under the new Trump administration.

INSURER DEALS
The Cigna takeover was one of two insurer deals that the Justice Department’s antitrust division stopped earlier this year to prevent the industry’s biggest players from consolidating. The other was Aetna Inc.’s planned acquisition of Humana Inc. While Aetna and Humana terminated their deal after losing at trial, Anthem appealed.
Last month, Anthem told the appeals court that the February decision blocking the deal was wrong because it rejected the lower medical costs the merger would provide to companies. Anthem says that by combining with Cigna it can produce $2.4 billion in savings by lowering reimbursements paid to doctors and hospitals.