Anthem Says Bid to Save $49 Billion Deal Was ‘Cut Off at Knees’
(Bloomberg) -- Cigna Corp. officials did everything they could to sabotage a $48.9 billion merger with Anthem Inc., including refusing to consider divestitures that would have helped the deal win regulatory approval, Anthem’s general counsel told a judge.
Cigna refused to turn over data Anthem executives needed to convince U.S. Justice Department attorneys of the merger’s value to customers, Thomas Zielinski, Anthem’s top lawyer, testified Monday in the opening of a damages trial tied to the transaction’s collapse.
After Cigna Chief Executive Officer David Cordani expressed unhappiness with his role in the combined company, Cigna “cut us off at the knees’’ in their joint effort to fend off antitrust concerns, Zielinski told Delaware Chancery Court Judge Travis Laster.
Cigna, which Anthem would have acquired, 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 in damages because of Cigna’s intransigence in turning over information to push the merger forward.
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 clashing narratives about how the transaction -- which would have created the largest American health insurer by membership -- wound up on the rocks.
Anthem wanted to buy Cigna in 2015 to expand its offerings to all 50 states, but Cordani kept turning down its buyout offers because he wanted to be CEO of the combined company, Zielinski said. Then-Anthem CEO Joseph Swedish had already claimed the top spot as part of his company’s offer.
“They never gave up’’ in pushing for Cordani to become the CEO of the new company, Zielinski said. The deal was signed in July 2015. Cordani wound up with the title of president and chief operating officer of the combined firm.
But as the Cigna CEO’s dissatisfaction grew, his company’s cooperation on issues such as integrating the health insurers’ operations and responding to the government’s antitrust suit waned and then ceased, Zielinski said. A judge later blocked the merger as anticompetitive and an appeals court upheld the ruling.
At one point, Cigna officials said they weren’t interested in selling off any of the insurer’s assets because they didn’t see a “credible path’’ to address the government’s concerns, Zielinski told the judge. They also derided Anthem’s attempts to carry the merger through as a “futile effort,’’ he said.
U.S. Antitrust Review of M&A - The Issues: BI Basics
The animus grew between Anthem officials and Cordani after the deal was signed in 2015, Zielinski recalled during cross examination. He acknowledged that he considered the Cigna CEO to be manipulative, passive-aggressive and self-centered.
Swedish, who considered Cordani to be “a bully,” had grown to loathe his counterpart so much that he wanted to diminish his responsibilities once the merged company was up and running, Zielinski added. The in-house lawyer said that Cordani had the same kind of ill feeling for Swedish.
But Anthem’s board squashed Swedish’s effort to reduce Cordani’s role, Zielinski said. Directors worried their Cigna colleagues would think they’d been “suckered” into signing the merger deal, Zielinski added.
In its court filings, Cigna alleges wrongful conduct by Anthem while the companies sought regulatory approval. In the guise of pushing the merger, Anthem sought to undermine Cigna’s business by stealing confidential information and harassing its customers, Cigna claims.
Cigna officials say their shareholders are owed $14.7 billion in damages based on the stock premium they would have received had the deal been consummated. The insurer also wants Laster to force Anthem to pay a $1.85 billion termination fee over the fizzled merger.
The case is In Re Anthem-Cigna Merger Litigation, 2017-0114, Delaware Chancery Court (Wilmington).
©2019 Bloomberg L.P.