Anthem-Cigna and Aetna-Humana breakup provisions, dissected

News that the U.S. Department of Justice is going to court to block Anthem’s efforts to acquire Cigna Corp. and Aetna’s effort to acquire Humana raises an important question: How much cash could the acquisition targets get if the deals die?

Indianapolis-based Anthem has been trying to acquire Bloomfield, Connecticut-based Cigna for about $48 billion in cash and stock.

Hartford-based Aetna agreed to pay about $37 billion in cash and stock for Louisville, Kentucky-based Humana.

Like most publicly traded companies involved in major deals, negotiators included provisions for what might happen if the deals collapsed in both the Anthem-Cigna merger agreement and the Aetna-Humana agreement. 

Related: U.S. readying suits against Anthem, Aetna insurer deals

If Cigna, Humana or both end up getting deal breakup cash, the cash could be used for purposes such as paying extra dividends to shareholders, improving health coverage value — or making acquisitions.

Here’s a look at the deal termination provisions included in the agreements, and in the related documents sent to shareholders with the agreements.

Anthem executives talked about the termination fee in a conference call with securities analysts when they announced the Cigna deal. (Image: Thinkstock)

1. Anthem could end up having to pay Cigna $1.85 billion. Aetna could have to pay Humana $1 billion.

The Anthem-Cigna deal agreement says Anthem could have to make its “reverse termination fee” payment if the deal fails to close for antitrust reasons by Jan. 31, 2017. The companies can extend that deadline to April 30, 2017.

Either Aetna or Humana could terminate the Aetna-Humana deal, and make their termination fee payable, if their deal fails to close by Dec. 31, 2016.

Related: Aetna’s Humana deal pressures Cigna to agree on Anthem offer

Aetna and Humana started talking about a termination fee about three months into negotiations. (Image: Thinkstock)

2. Aetna and Humana talked about termination fees sooner than Anthem and Cigna.

Anthem and Cigna say in a description of the background for their deal that they started talking about making a deal in May 2014. The background notes show their negotiators first mentioned a deal termination fee provision in July 2015.

Aetna and Humana say they started talking about making a deal in March 2015, and that they began talking about a termination fee provision in June 2015. 

Related: AIG Confirms It Will Get Breakup Fee