Health insurance giants Anthem and Cigna will have to handle their own costs associated with a failed merger, the Delaware Court of Chancery ruled Monday.
In a 311-page memorandum opinion that referred to the companies’ merger agreement and subsequent legal proceedings as “star-crossed” and a “battle for power,” Vice Chancellor J. Travis Laster gave each company a partial win by ruling in their favor on certain claims, but ultimately barred either from obtaining damages from the other.
The two companies, which at the time were the second- and third-largest health insurers in the United States, in 2015 set up a merger agreement that would have created the largest health insurance company in the nation. The U.S. Department of Justice ultimately blocked the merger, reasoning it would have anticompetitive effects.
Cigna filed its Court of Chancery case in 2017, seeking to establish its right to terminate the merger. Anthem responded with another Court of Chancery lawsuit, and the two cases were consolidated into the damages action that Laster ruled on Monday.
The merger agreement included several covenants which required both companies to put forth efforts to meet agreement conditions and avoid legal obstacles as much as possible to make sure the deal closed. Each of the companies argued the other violated one of the covenants in the merger agreement. Anthem asked for $21.1 billion in damages from Cigna, while Cigna sought $14.7 billion in damages and a $1.8 billion reverse termination fee from Anthem.
Though the opinion critiqued both companies’ handling of the agreement, Laster wrote Anthem took appropriate steps to pursue the deal’s closing, while Cigna intentionally tried to derail it.
According to the opinion, tensions between Anthem and Cigna rose in 2015 and 2016 when Anthem acted as an acquirer while planning integration, rather than as one of two equal companies in a merger. Cigna undertook efforts to block the deal, including withdrawing from integration planning and carrying out a covert communications campaign referred to as “Project Alpha.” Cigna CEO David Cordani also gave testimony beneficial to the Department of Justice’s case throughout the course of its antitrust litigation, which Laster wrote was done intentionally to block the merger.