Cigna did not disclose how much it would pay as part of the settlement and did not admit liability or wrongdoing. The Bloomfield, Conn.-based insurance company did not respond to a request for comment by deadline but said in a federal filing that it settled with shareholders “solely to avoid the costs, risks and uncertainties inherent in litigation.”
Last month, Humana similarly agreed to settle shareholder lawsuits that challenged its tie-up with Aetna.
Lawsuits almost always arise in large mergers and acquisitions. In 2014, 93% of transactions valued at more than $100 million were challenged in court by investors, compared with only 44% in 2007, according to consulting firm Cornerstone Research. The lawsuits usually result in settlements and additional disclosures of the deal in question—and easy paydays for lawyers and plaintiffs.
Plaintiffs' lawyers will receive an “award of reasonable fees” in the recent Cigna settlement. In return, all future litigation challenging the merger will be cast aside.
After Anthem and Cigna announced their $54.2 billion transaction this past July, the largest-ever health insurance combination in the U.S., several shareholder lawsuits popped up. Cigna's settlement involved six class-action complaints. Each lawsuit alleged that the final deal undervalued Cigna and the process was marred by conflicts of interest.
Previous disclosures showed that the top executives of Aetna, Anthem, Cigna and Humana were courting each other and met several times over the course of more than a year before agreeing to their respective transactions.
Anthem and Cigna shareholders will vote to approve or reject the merger on Thursday. Most are expected to give their blessing to the deal.
However, the final say still rests with the federal government. The U.S. Justice Department's antitrust division is reviewing the Aetna and Anthem mergers and is expected to announce its decision by next year. The department did not provide an update of its reviews. While the CEOs of both health insurers anticipate federal approval, they also expect their companies will have to divest health plans in areas with high levels of membership overlap.