(Bloomberg) — U.S. antitrust officials are poised to file lawsuits to block Anthem's takeover of rival health-insurer Cigna Corp. and Aetna's deal to buy Humana, according to a person familiar with the matter.
Justice Department officials, who are responsible for protecting competition, are concerned that the deals, which would transform the health-insurance industry by turning its five biggest companies into three, would harm customers, according to several people familiar with the situation. While the companies may offer to sell assets to gain approval for the deals, that's unlikely to sway antitrust officials, one of the people said.
The final decision on whether to sue to block the deals could come this week or next, another of the people said. The companies could settle a lawsuit before or after one is filed.
Shares of all four companies fell following the news. Humana, which is based in Louisville, Kentucky, dropped 3.9 percent to $153.38 at the close in New York and Bloomfield, Connecticut-based Cigna fell 2.1 percent to $130.30. Indianapolis-based Anthem lost 2.2 percent to $132.06, and Hartford, Connecticut-based Aetna slid 2.7 percent to $115.15.
The Justice Department declined to comment on the review.
"We are steadfast in our belief that this deal is good for consumers and the health care system as a whole," said T.J. Crawford, an Aetna spokesman.
Alex Kepnes, a Humana spokesman, didn't respond to requests for comment. Matt Asensio, a Cigna spokesman, declined to comment, as did Bonnie Jacobs at Anthem.
Deal skepticism
Any lawsuit would continue a string of merger challenges by antitrust enforcers looking to stop industry consolidation and would deal a blow to bids by Anthem and Aetna to gain scale by snapping up rivals. According to the terms of both tie-up deals, the companies have agreed to fight any government lawsuits in court. Such a move would likely require months of litigation to rescue takeovers that were struck last year amid a wave of deals that swept the industry.
Aetna and Humana will probably fight any lawsuit in court, while Anthem and Cigna are less likely to litigate against the government, said Ana Gupte, an analyst at Leerink Partners.
"They're obligated by the terms of their merger agreement, but they both may decide to walk away," she said about Anthem's bid for Cigna. "They recognize the probability is low, and there's also been a lot of conflict between the two companies."
For antitrust officials at the Justice Department, it's standard practice to prepare complaints against deals even in cases that are ultimately settled with remedies like asset sales. But in recent years, the department has shown an increasing willingness to go to court to block deals it believes could stifle competition, and for months antitrust officials have signaled their skepticism about the insurer tie-ups.
The Justice Department's No. 3 official, Bill Baer, who previously ran the antitrust division and is overseeing the investigations into the insurer mergers, said this year that the two deals were "transformational" and represented a "game changer" for the industry.
