Anthem Inc. on Friday accused Cigna Corp. of undermining the companies’ merger agreement and implied that legal action is imminent.
Anthem said in a statement that it has given Cigna a merger agreement termination notice.
“Cigna has failed to perform and comply in all material respects with its contractual obligations,” Anthem said. “Cigna’s repeated willful breaches of the merger agreement and its successful sabotage of the transaction has caused Anthem to suffer massive damages, claims which Anthem intends to vigorously pursue against Cigna.”
Cigna responded by announcing that it will seek payment of a $1.85 billion deal termination fee from Anthem, and that it will pursue claims for more than $13 billion in additional damages. Anthem owes Cigna the additional damages “for the harm it caused Cigna and its shareholders,” Cigna said.
In the same announcement, Cigna said it will spend at least about $1.6 billion on buying back its own stock between now and the end of the year as a result of the termination of the Anthem-Cigna transaction.
Indianapolis-based Anthem and Bloomfield, Connecticut-based Cigna announced the $48 billion agreement in July 2015, after months of press reports about Anthem pursuing Cigna.
Anthem predicted when the deal was announced that the combined company would have the clout it needed to do a better job of managing care and negotiating affordable prices with big, for-profit hospital companies and other health care providers.
The American Medical Association and hospital groups opposed the deal, saying it would give the combined company too much market clout.
Federal antitrust regulators sided with the providers and fought the deal.
In February, a judge at the U.S. District Court for the District of Columbia ruled in favor of the antitrust regulators.
In April, a three-judge panel at the U.S. Court of Appeals for the D.C. Circuit decided 2-1 to uphold the district court ruling.
Anthem has been fighting on a separate track, in the Delaware Court of Chancery, to keep the merger agreement in effect and get more time to complete a deal.
Delaware Chancery Court Judge Travis Laster gave Anthem one merger agreement extension. On Thursday, however, he ruled against a request for a new 60-day extension.
Some observers have suggested that the new Trump administration might change how federal antitrust regulators handle big corporate deals, but Laster wrote that he believes it is unlikely that Anthem could complete the acquisition.
Under the terms of the breakup provisions in the Anthem-Cigna merger agreement, Anthem might have to pay a $1.85 billion termination fee.
The deal agreement may free Anthem from having to pay an antitrust-related breakup fee if Cigna committed a willful breach of the agreement terms.
The termination could also have implications for America’s Health Insurance Plans, health insurers’ main trade group.
Joseph Swedish, the chairman of Anthem, is the current chairman of AHIP.
David Cordani, the president of Cigna, is also on the AHIP board.
— Read After Two Mega Deals Blocked, Health Insurers Plot Next Moves on ThinkAdvisor.