(Bloomberg) — Hours after the U.S. government sued to block two major health insurance mergers, one deal appears headed for the courthouse while the other could be headed to the graveyard.
Within minutes of the Justice Department filing its case in federal court, Hartford-based Aetna and Louisville, Kentucky-based Humana issued a joint statement, promising they'd fight in lockstep and "vigorously defend the companies' pending merger."
It's the sort of statement that's typical at the start of such antitrust suits. Yet Bloomfield, Connecticut-based Cigna Corp. seemed to use a related lawsuit also filed Thursday as a potential escape from Indianapolis-based Anthem's $48 billion takeover of the company. Instead of a joint statement promising to fight, it quickly e-mailed its own comment to reporters, without Anthem, saying it didn't know when a deal would close, "if at all."
"Cigna is saying, 'We'd like to walk,'" Ana Gupte, an analyst at Leerink Partners, said by phone. "If there's any opportunity for a settlement between Anthem and Cigna around the breakup fee and being able to walk away, they will try to do that."
Anthem declined to comment on Cigna's comments Thursday, other than to say it was ready to challenge the department. If the deal falls apart under antitrust scrutiny, Cigna is owed a breakup fee of $1.85 billion, according to the companies' agreement.
Deal drama
Thursday's drama was the latest twist in one of the most consequential sets of deals in the U.S. health insurance industry. U.S. officials have said they want to block the mergers to preserve competition, while the companies say they need the transaction to control the cost of health care and push back against consolidating doctors and hospitals.
After Anthem first publicly approached Cigna in 2015, it was rejected by the insurer partly over what role Cigna CEO David Cordani would play at a combined firm. Strife between the companies has spilled out into the open again in recent months. Ironically, dysfunction between the two may end up being good for Aetna and Humana, since a key part of the government's argument against the deals has been that they would shrink the five biggest players into three.
"If Cigna is terminated, then the notion of the five to three disappears, and it also makes the DOJ's court case more difficult," said Ira Gorsky, an analyst at Elevation LLC. He said there's little chance that Anthem and Cigna are able to complete their deal.
Humana shares rose 8.3 percent to $171.53 at the close in New York Thursday, while Aetna gained 1.6 percent to $118.30. Cigna was up 5.4 percent to $140.32 and Anthem climbed 2.6 percent to $139.
A way forward?
Aetna is already trying to find a way forward despite U.S. officials' skepticism of the deals. The company is willing to offer up more divestitures to reach a settlement, CEO Mark Bertolini said in an interview Thursday. "We can settle tomorrow," he said. "If there are more counties, we can put those on the table."
Aetna and Humana may also be willing to play hardball, putting their participation in Obamacare in play. The Justice Department said Thursday that part of its reasoning was to preserve competition in the Affordable Care Act's marketplaces for individual insurance.
