Cigna rejects Anthem's merger plan

Feb 15, 2017, 00:32
Cigna rejects Anthem's merger plan

Aetna and Humana are calling off their $34 billion health care merger.

In a statement after Cigna announced its suit, Anthem said under the companies' merger contract, "Cigna does not have a right to terminate the agreement". Aetna will pay Humana a $1 billion breakup fee. Aetna agreed to acquire Humana in July 2015, and the US sued to block the takeover about a year later.

On Tuesday, health insurance giants Aetna (AET - Free Report) and Humana (HUM - Free Report) announced that they have called off their merger agreement after a federal court decision struck down the deal as anticompetitive.

Additionally, Aetna said it has terminated its previously announced agreement to sell certain Medicare Advantage assets to Molina Healthcare, Inc.

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Their deadline to complete the deal or agree to extend it while they appealed was February 15.

"Cigna believes that the transaction can not and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna's shareholders", the Connecticut-based company said in a written statement. Humana will update its financial outlook for the coming year this afternoon.

"It's good to have a resolution to the Humana-Aetna proposed merger after 19 months". 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. Another district court judge last week blocked that $54 billion tie-up, saying it would harm consumers. Meanwhile, Aetna will be fine on its own, Lekraj said. The privately run program covers health benefits for 18 million Americans and competes with traditional government-run Medicare, which covers the balance of the 55 million people 65 and older as well as the disabled. What's more, Aetna has to pony up a cool $1 billion to do so.