In a move that defies Anthem’s push to fight for their deal, Cigna has terminated its merger agreement with Anthem and filed suit against the larger insurer.
Earlier this month, a federal judge ruled against the two insurers’ planned merger, saying it would violate antitrust law by lessening competition in the national accounts market. Anthem responded by saying it intends to appeal the ruling.
But in a statement issued Tuesday, Cigna said that given the court’s decision, it “believes that the transaction cannot and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna’s shareholders.”
Thus, Cigna filed a suit against Anthem in the Delaware Court of Chancery, seeking a declaratory judgment that Cigna has lawfully terminated the merger agreement and that Anthem is not permitted to extend the termination date.
The suit also asked the court to compel Anthem to pay Cigna the $1.85 billion termination fee outlined in the merger agreement, plus additional damages of more than $13 billion. Those damages “include the lost premium value to Cigna's stockholders caused by Anthem's willful breaches of the merger agreement,” according to a question-and-answer document filed with the Securities and Exchange Commission.
For its part, Anthem maintains that "under the terms of the merger agreement, Cigna does not have a right to terminate the agreement. Therefore, Cigna’s purported termination of the merger agreement is invalid," a company spokesperson said in an emailed statement. "Anthem will continue to enforce its rights under the merger agreement and remains committed to closing the transaction."
However, Cigna “vigorously” disagrees, it noted in its Q&A document. Cigna said it reached out to Anthem to resolve the issues without having to turn to litigation, but that effort was unsuccessful.
“The company believes strongly in the merits of its case and hopes that this matter is rapidly resolved,” Cigna said in its announcement.
Earlier Tuesday, Aetna and Humana announced that they had mutually decided to terminate their merger agreement following a federal judge’s decision in January to block the deal. Aetna agreed to pay Humana the $1 billion breakup fee included in their contract.
Editor's note: This article has been updated to include a statement from Anthem.