In Anthem-Cigna ‘Soap Opera,’ Judge Hands Damages to Neither (2)

A Delaware judge rebuffed efforts by both Cigna Corp. and Anthem Inc. to collect billions over their failed merger, saying Cigna had breached its obligations but the merger was likely to have been blocked on antitrust grounds anyway.

Cigna, which would have been acquired by Anthem, had demanded about $15 billion in damages and termination fees. Anthem, which runs Blue Cross and Blue Shield plans in more than a dozen states, had insisted it was owed $21 billion because, it claimed, Cigna intentionally sank the deal by failing to challenge Justice Department opposition.

“Despite high-profile protagonists, a sprawling record, and billions of dollars in damages claims, this is a breach of contract case,” Chancery Court Judge Travis Laster wrote in an opinion issued Monday.

Laster had urged the companies in a November hearing to end their “corporate soap opera.”

“This outcome leaves the parties where they stand,” Laster wrote in Monday’s opinion. “Neither side can recover from the other. Each must deal independently with the consequences of their costly and ill-fated attempt to merge.”

The ruling is more favorable for Anthem because “it removes some overhang around a potential hefty break-up fee payment,” Citi analyst Ralph Giacobbe said Monday in a note.

Competing Narratives

The case provided an inside look at one of the largest corporate deals in U.S. history to go sour and a courtroom version of the blame game. It featured competing narratives about how the transaction, which would have created the largest American health insurer by membership, wound up on the rocks.

Anthem offered to buy Cigna in a 2015 cash-and-stock deal to bulk up and gain negotiating power to lower reimbursement rates to health-care providers. The U.S. Justice Department’s antitrust division sued in 2016 to block the tie-up, arguing it would further consolidate an already concentrated market and lead to higher costs for employers and consumers.

A year later, a federal judge in Washington backed the government’s position and an appeals court upheld that ruling. Anthem asked Laster to keep the deal alive while it appealed to the U.S. Supreme Court, but the state court judge refused.

The case is In Re Anthem-Cigna Merger Litigation, 2017-0114, Delaware Chancery Court (Wilmington).

(Updates with Citi note in sixth paragraph.)

To contact the reporters on this story:
Christopher Yasiejko in Wilmington, Delaware, at cyasiejko1@bloomberg.net;
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Anthony Lin, Steve Stroth

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