By Rishi Shah
Money and Investing Writer
The Cigna (NYSE: CI) and Anthem insurance company (NYSE: ANTM) merger has taken a turn for the worst when the deal was stopped by the federal district on anti-competitive grounds. Essentially stopping a monopolized insurance system in America. The merger, worth an astounding $48 billion, would make this transaction one of the largest in history. At the same time, another pair of insurers, Humana (NYSE: HUM) and Aetna (NYSE: AET), planned a merger that fell through with less drama and lawsuits from either side.
Anthem had until April 10 to work with Cigna on an appeal to the court to make the merger a possibility but Cigna pulled out of this deal prematurely causing tension and confusion on both sides. Cigna claimed that Anthem consciously kept them in the dark by having a secret team of official’s hashes out integration plans without telling the other party. On the other hand, Anthem claimed that Cigna has been doubtful and wanting to pull out of this deal. Both parties seem to be lacking trust and are looking out for the individual’s best interest.
Cigna now wants to completely back out of the deal and do not want to go through an appeal process at all. In an article, Forbes states “Cigna said of the additional more than $13 billion in damages the Anthem merger process has caused the company. “This action is necessary to enforce and preserve Cigna’s rights and protect the interests of its shareholders”. Cigna was promised a $1.85 billion break-up fee by Anthem if this deal fell through and now are seeking an additional $13 billion in damages to compensate for the lost revenue to shareholders.
If accepted, this would cost Anthem almost $15 billion in damages. To put that into perspective, Anthem reported expected revenue of $80 billion in 2016. Cigna could severely impact
According to Bloomberg, “in Cigna’s mind, Anthem didn’t even have the right to extend the termination date to April 30 because it had breached the merger agreement.” Cigna clearly wants out of this deal but Anthem is holding them accountable and wants to go through the appeal process, which is most likely to be denied. With the Humana and Aetna deal falling through, they may have a chance to still change the landscape of the American insurance field by reducing the number of options from five large companies to four.
It is evident that both sides are on ice and cannot seem to come to a common ground on individual issues. Each wants to a claim to being the highest profiting insurer and do not want to compromise and merge as a uniform unit.
This whole ordeal seems like a massive and expensive divorce with more secrets and backstabbing behavior being revealed as time goes on. Even Bloomberg referenced the split by claiming, “Cigna Corp. just pulled the M&A equivalent of demanding full custody in a divorce battle”. For the American consumer, the deal falling through is great as we have a more competitive market for insurance, for Anthem on the other hand, this may be a little costly.
A version of this article appeared in the Tuesday, February 21st, 2017 print edition.
Contact Rishi at