Cigna’s CEO Expressed Regret About the Anthem Merger That Later Failed

(Bloomberg) -- While publicly backing Cigna Corp.’s 2015 merger with rival health insurer Anthem Inc. as good for investors, Cigna’s CEO privately expressed regret about signing on to a deal that left him with a reduced role, lawyers for Anthem said in court Monday.

Cigna shareholders were slated to get nearly a 30 percent premium for their stock in Anthem’s $48.9 billion buyout. But David Cordani, Cigna’s chief executive officer, lost out to Anthem CEO Joseph Swedish in a corporate duel over who would lead the combined company, set to be the largest health insurer by membership in the U.S.

Anthem officials contend that prompted Cordani to write in June 2015 emails that his “soul was still unsettled’’ by the merger and that he had “remorse about making the decision’’ to agree to the combination, according to evidence introduced in a trial over the failed deal. The merger imploded a year later when a judge found it was anticompetitive.

Now Cigna and Anthem are battling in Delaware Chancery Court over whether one owes the other billions of dollars in damages over its collapse. Cigna is seeking more than $16 billion in damages and termination fees. Anthem, which runs Blue Cross and Blue Shield plans in more than a dozen states, claims it’s owed $20 billion.

Anthem officials accuse Cordani of sabotaging the deal by refusing to turn over crucial information that could have convinced government regulators of the deal’s value. Cigna executives countered that Anthem managers botched getting antitrust clearance and used the proposed merger to hurt its rival.

Cordani testified he was unhappy with Swedish’s plan for integrating the two health insurers, saying the buyer wasn’t making any provision for the target’s businesses to thrive. He complained that Anthem officials refused to allow Cigna units to benefit from discounts the rival insurer had secured from health-care providers, which could put them in a “death spiral.’’

Cordani also wasn’t pleased when he learned Swedish would be the merged company’s CEO, while he would serve as president and chief operating officer. He proposed the new board recognize him as Swedish’s successor after the merged company operated for two years. His Anthem colleagues rejected that request.

“Did you think that Mr. Swedish didn’t know you were coming for his job?’’ Glenn Kurtz, one of Anthem’s lawyers asked.

“I don’t know what he knew,’’ Cordani replied.

Shortly after the merger was announced, Cordani said in an email that “he was steeled for a fight,’’ according to evidence introduced in the case. On the witness stand, Cordani denied that indicated he had decided to torpedo the merger.

Once Cordani learned he wouldn’t be leading the new company or in charge of the integration of the two insurers, Cigna hired lawyers and consultants to poke holes in the merger, including the law firm Wachtell Lipton, Kurtz said in court. Anthem officials didn’t know about Wachtell’s hiring, according to court filings.

Ariane Finkel, a Wachtell spokeswoman, didn’t immediately respond to a call for comment.

Consultants were tapped to plant stories in the press critical of the merger, Anthem alleges. Kurtz produced memos to show the CEO was briefed on that effort. Cordani said he wasn’t aware that such a plan was “activated.”

The case is In Re Anthem-Cigna Merger Litigation, 2017-114, Delaware Chancery Court (Wilmington).

©2019 Bloomberg L.P.