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There's no dispute that a $48.9 billion merger announced in 2015 between health insurers Anthem Inc. and Cigna Corp. imploded two years later over antitrust concerns. Now, the question is whether one owes the other billions for the deal's failure.
A Delaware judge will start the process of deciding that pricey dispute Monday in a trial of dueling lawsuits by Anthem and Cigna over the merger meltdown.
Cigna, which would have been acquired by Anthem, says it's the injured party and is demanding about $15 billion. Anthem, which runs Blue Cross and Blue Shield plans in more than a dozen states, insists it's owed $20 billion because Cigna dragged its feet to sabotage the deal.
The case provides a look at one of the largest corporate deals in the U.S. to go sour and a courtroom version of the blame game. It features competing narratives about how the transaction — which would have created the largest American health insurer by membership — wound up on the rocks.
"It's a little surprising that this didn't settle and it has to be hashed out in court,'' said Larry Hamermesh, executive director of the University of Pennsylvania's Institute for Law and Economics and an expert in Delaware corporate law.
The companies will probably reach a settlement in which Anthem pays Cigna something less than the full amount of the breakup fee of $1.85 billion, said Ana Gupte, an analyst at SVB Leerink. That would help Cigna reduce debt taken on from acquiring Express Scripts Holding Co. for $52.7 billion. Cigna sold $20 billion of bonds in September to help fund the deal.
"They need to pay down that debt in the next 18 months," Gupte said. "From their standpoint, a $1.8 billion breakup fee is meaningful."
Brian Henry, a Cigna spokesman, said the company "strongly" believes in its case. Brooke Padilla, an Anthem spokeswoman, didn't immediately return an email seeking comment.
Delaware Chancery Court Judge Travis Laster is no stranger to the two companies' jousting over the deal. Laster ruled in May 2017 that Cigna could walk away from the merger because another court blocked the deal as anticompetitive.
The 10-day trial in Wilmington is set to feature testimony from top executives and Blue Cross Blue Shield Association Chief Executive Officer Scott Serota. He's expected to testify about Cigna's claims that Anthem violated a requirement to use its best efforts in addressing the merger's anticompetitive effects and the government's objections.
