Aetna and Humana Abandoned Their $37 Billion Deal of Combination

Feb 16, 2017, 00:48
Aetna and Humana Abandoned Their $37 Billion Deal of Combination

Health Insurance providers Aetna and Humana announced Tuesday morning that they would not seek an appeal on the US federal court's decision to block their $34 billion merger.

Cigna is suing Anthem for a $1.85 billion break-up fee and suing it for $13 billion in damages, alleging Anthem did not make a good-faith attempt to complete its $54 billion deal.

"Anthem contracted for and assumed full responsibility to lead the federal and state regulatory approval process, as well as the litigation strategy, under the merger agreement", Cigna said in a press release.

Also on Tuesday, Aetna Inc and Humana Inc walked away from their $34 billion merger on Tuesday weeks after a separate judge blocked their deal on similar grounds.

Aetna now owes $1 billion in severance charges to Humana and $75 million to Molina Healthcare Inc.

Hours later, Anthem said it would appeal the decision. The Department of Justice sued last summer to stop both acquisitions, and separate federal judges recently rejected them after trials held late previous year. In addition, Aetna said that it would redeem the notes, which was issued to buy Humana, for cash.

Anthem is countering Cigna a day after its smaller rival sued to terminate a $48 billion buyout agreement.

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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). "Anthem will continue to enforce its rights under the Merger Agreement and remains committed to closing the transaction".

Anthem says in its own suit that Cigna has waged a campaign to sabotage the merger.

The planned merger between Aetna Inc.

TheAetna-Humana deal would have been another giant combination, but a federal judge, citing antitrust concerns, shot down it down.

Humana is strong in the Medicare Advantage business of selling private Medicare plans.

Steve Schlegel, Anthem's vice president for corporate development, said 23 percent of Cigna's domestic revenue would have to be rebranded to comply with the rules of the BC/BS association.

Humana also announced that 2017 would be the a year ago in which the company will offer individual commercial medical coverage, and it will service members in the 11 states where it is now active.