(Bloomberg) — Cigna Corp. (NYSE:CI) and Anthem Inc. (NYSE:ANTM) are poised to do the biggest deal that the health insurance industry has ever seen — if their CEOs can get along.
One of the main sticking points in Anthem's $47 billion bid for Cigna is differing views on what role David M. Cordani, Cigna's 49-year-old chief executive officer, would play.
See also: Cordani To Lead CIGNA
Another leadership issue separating the two sides is how many board seats Cigna would get.
Anthem has pounced on Cordani's unwillingness to step aside as a putting-shareholders-second stance. Cigna says Anthem's CEO, Joe Swedish, wants to wear more hats than he can handle. Although arguments over which king-of-the-mountain goes where are common in mergers, they're usually settled before the public gets wind of talks.
Both companies' stocks have more than doubled in the last two years. Cigna is up 112 percent and Anthem 118 percent as of June 1. Both companies have grown earnings per share. And both are adding customers — Anthem has increased its medical membership by about 13 percent in the five years through Dec. 31, while Cigna boosted its customer base 16 percent.
So is the only difference CEO ego?
"Anthem has decided that Cigna has overplayed its hand and is vulnerable by using a social justification for saying no," said John Coffee, a professor at Columbia University's law school. "I understand why the younger guy doesn't want his career ended by being taken over. But that doesn't mean there can't be an arrangement."
Four jobs
Under an offer made public Saturday, Swedish would take on four positions at the combined firm: chairman, CEO, president and head of the integration team. Cigna has said that Cordani should play a bigger role.
Anthem's public cash and stock offer — at 29 percent more than Cigna's average price over the 20 trading sessions before Monday — puts pressure on Cigna's board to do a deal, after rejecting Anthem on Sunday. Investors are often more interested in a large premium than they are in who takes control.
"At some price, the shareholders are going to be delighted," said Michael Bernstein, a partner at Baird Capital's U.S. private equity team who focuses on health care.
Cigna outlined concerns beyond leadership in a letter released Sunday and signed by Cordani and Chairman Isaiah Harris Jr. The company said it has a better track record than Anthem, and criticized it for a data breach disclosed in February that exposed information on 80 million people. It also said that a combination could create antitrust issues. Anthem said none of this is an obstacle to a deal.
Dueling charts
Over Cordani's tenure as CEO, which began at the start of 2010, the stock has outpaced Anthem's, rising about 30 percent a year, Cigna pointed out.
Anthem has a chart of its own, though.
