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Another healthcare merger goes south: Cigna terminates Anthem tie-up

Wednesday, February 15, 2017 7:13
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As US president Donald Trump looks to roll back on his predecessor, Barrack Obama’s medical care policies, another major US healthcare merger has fallen apart, with Cigna Corp. (NYSE:CI) terminating a US$48bn marriage deal with Anthem Inc. (NYSE:ANTM).

Cigna’s decision marked the second big merger termination in the sector this week after Aetna Inc.  (NYSE:AET) and Humana Inc. (NYSE:HUM) ended their proposed US$34bn merger yesterday.

The moves are the latest fallout from the Obama administration’s decision to challenge corporate mergers on anti-competition grounds and seek to block so-called tax inversion deals.

Aetna and Humana scrapped their deal after US District Court Judge John Bates ruled in January that the transaction was “likely to substantially lessen competition” in certain markets for Medicare Advantage plans and Affordable Care Act options.

Anthem and Cigna – the US’s second and third largest health insurers – suffered a similar federal court setback last week when US District Court Judge Amy Berman Jackson blocked their merger, saying it “is likely to have a substantial effect on competition in what is already a highly concentrated market.”

Anthem initially said it would appeal the judgement, but Cigna said it decided to terminate the deal and has filed suit seeking a US$1.85bn reverse termination fee and more than US$13bn in additional damages against its erstwhile partner

Cigna said that, while it was “disappointed” in the merger’s failure, it was moving ahead by expanding its stock repurchase program to a total of US$3.7bn.

The company also said its 2017 outlook for adjusted earnings growth will get a boost from the “significant” capital available for deployment.

Story by ProactiveInvestors


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