By Anna Wilde Mathews and Peg Brickley
Cigna Corp. and Anthem Inc. won't have to pay damages to one another over their failed $48 billion merger deal, a Delaware judge decided Monday, potentially resolving a bitter, yearslong legal battle that had the two insurance giants trading accusations of skulduggery.
In dueling lawsuits, each of the health-insurance giants sought billions of dollars in damages from the other. Both companies argued that its erstwhile partner had sabotaged their proposed combination, which foundered in 2017 after court rulings against the merger on antitrust grounds. Cigna wanted damages of $14.7 billion, along with a breakup fee of about $1.8 billion, from Anthem. Anthem sought damages of $21.1 billion from Cigna.
Vice Chancellor J. Travis Laster, of the Delaware Chancery Court, wrote that Anthem had sought to complete the merger and "chose a sound strategy and took all of the actions necessary and appropriate to pursue it." Cigna, he said, had breached its obligation to try to consummate the deal: "Rather than seeking to complete the Merger, Cigna sought to derail it," he wrote.
Calling the drama a "corporate soap opera," Judge Laster attached blame to both sides. Cigna proved that it was likely that the deal would have been blocked regardless of its actions, he wrote. In the end, "each party must bear the losses it suffered as a result of their star-crossed venture."
Shares in Cigna fell 2.1% on the New York Stock Exchange, while shares in Anthem rose 1.5%.
Investors had largely discounted the likelihood of sizable damage awards in the litigation, but some believed Cigna might still get the breakup fee, which the judge didn't uphold, said Matthew Borsch, an analyst with BMO Capital Markets. "That was a little bit of a positive surprise for Anthem investors, and a little bit of a negative surprise for Cigna investors," he said.
In a written statement, a spokeswoman for Cigna said the company is "pleased that the Court agreed with us that Cigna did not cause the merger to fail." The company still believes in its case and is "evaluating our options with respect to appeal," she said.
A spokeswoman for Anthem said the insurer is "satisfied with the decision determining that Cigna breached its obligation to use best efforts to obtain regulatory approval for the merger," and forfeited the breakup fee.
Anthem said in July 2015 that it would acquire Cigna, in a combination the two insurers initially pitched as bringing together complementary assets. In 2016, the Justice Department filed an antitrust suit to block the deal and courts sided with the antitrust enforcers, ruling against the merger in February 2017 and again later that year on appeal.
Behind the scenes, conflict between the two companies festered even as they pursued the deal. Each filed suit against the other after the antitrust rulings. During the litigation, they traded accusations of deception. Anthem claimed that Cigna and its chief executive, David Cordani, tried to sabotage the deal partly over concern about Mr. Cordani's future role in the combined company.
In his decision, Judge Laster wrote that by the spring of 2016, the Cigna leadership team "wanted the transaction to fail so they could continue managing Cigna as an independent company," and the company orchestrated a campaign to undermine the deal. For its part, Anthem misleadingly tried to portray its relationship with Cigna as solid while trying to hold the deal together, among other questionable actions, Judge Laster wrote.
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