Cigna has a lot riding on its pending deal with Express Scripts.
According to the terms of the agreement, Cigna would have to pay as much as $2.1 billion to the pharmacy benefit manager if the deal faces opposition from regulators. The insurer may have to pay the fee if the deal is terminated due to “a legal restraint relating to a regulatory law prohibiting consummation of the merger,” according to a Securities and Exchange Commission filing.
Under the agreement, either Cigna or Express Scripts would be required to pay a slightly lower $1.6 billion breakup fee if the deal falls through because the company’s board of directors changes its recommendations or if stockholders vote against the merger.
In March, the Department of Justice issued its second request to each company, and indication regulators are closely scrutinizing the deal. On an earnings call this week, CEO David Cordani emphasized the acquisition would cut down on specialty drug costs, generating savings that would be passed on to members.
Cigna is in the midst of its own legal battle with Anthem after a planned merger was blocked by a federal judge last year. The Connecticut insurer is seeking a $1.85 billion breakup fee from Anthem, in addition to $13 billion for harm it caused shareholders. Cigna is relying on that money to fund its Express Scripts purchase.
CVS-Aetna, the other massive merger undergoing a regulatory review, also includes a $2.1 billion termination fee.