Cigna sued Anthem in DE court Tuesday for $15 billion in damages and termination fees as it seeks to pull the plug on the companies' planned $54 billion merger - but Anthem said its fellow health insurer couldn't legally drop the deal.
Humana is entitled to a $1 billion breakup fee, which would amount to about $630 million after taxes.
"Under the terms of the merger agreement, Cigna does not have a right to terminate the agreement".
Rather than appeal the court ruling, Aetna and Humana on Tuesday called off the deal. (HUM) announced Tuesday morning that they have mutually ended their merger agreement following a ruling from the U.S. District Court for the District of Columbia granting a U.S. Department of Justice request to enjoin the merger. The federal judge said the Aetna-Humana deal would have been anticompetitive and raised prices for consumers.
The cases are Anthem Inc. v. Cigna Corp., No. 2017-114, Delaware Chancery Court (Wilmington) and Cigna Corp. v. Anthem Inc., 2017-0109, Delaware Chancery Court (Wilmington). 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.
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It listed several maneuvers that it says Cigna attempted to sabotage the deal.
An Anthem spokeswoman said the company is still committed to closing its deal with Cigna, signaling the breakup could be messy.
It was the second major deal shot down in federal courts in as many months.
The deal's demise also ends a related agreement to sell certain Medicare Advantage plans to insurer Molina Healthcare.
The judge's decision was not surprising considering the criticism and questioning that emerged as soon as the insurers announced their plan, says Randal Schultz, a partner at the law firm of Lathrop & Gage and chair of the firm's Healthcare Strategic Business Planning Practice group.
Anthem rejected the claim, calling Cigna's "purported" termination of the deal "invalid".
Humana said it will buy back at least $2 billion worth of shares in 2017 and earn a net profit of $16.65 to $16.85 per share, helped by the payment from Aetna, and raise its dividend.