National Blue Cross and Blue Shield carrier Anthem plans to appeal last week's decision blocking its $54 billion deal to acquire rival insurer Cigna. But it's not at all clear that Cigna is on board. The companies may end up in court fighting each other over a substantial breakup fee.
Anthem CEO Joseph Swedish said the insurer is “significantly disappointed by the decision” and would request an expedited hearing to reverse the court's decision. Cigna, on the other hand, said it is reviewing the opinion and evaluating its options.
Cigna may prefer to collect the $1.85 billion breakup fee that was part of the merger agreement ($1.2 billion after taxes) and add the sum to as much as $14 billion in capital the company will have available to pursue a different deal. Analysts have suggested Cigna could make a play for a smaller company that specializes in government-sponsored plans, such as WellCare, Centene or Molina Healthcare, or even go after Humana, whose merger agreement with Aetna was blocked by a federal judge in January.
Anthem doesn't need Cigna's consent to appeal the court ruling. Anthem also could argue Cigna hasn't done enough to see the merger through and doesn't deserve the breakup fee, said Matthew Cantor, an antitrust attorney at Constantine Cannon.
Cantor and other antitrust experts doubt Anthem has much chance of getting the ruling overturned on appeal or reaching a settlement with President Donald Trump's administration.
The relationship between Anthem and Cigna has deteriorated since the deal was struck a year and a half ago, and even factored into the judge's decision. U.S. District Judge Amy Berman Jackson wrote that the animosity between the two was “the elephant in the room.”
In fact, Jackson said Cigna officials are “actively warning against” the merger by presenting evidence and testimony that undermined the projections of future savings that would result from the combination. The two also have deep disagreements in strategy. While Anthem wants to strong-arm providers for deeper discounts, Cigna's model is based off of collaboration with providers. Anthem attempted to cast these differences as a “side issue,” according to the order. Jackson said it couldn't be ignored.
Jackson also concluded that the combination of Anthem and Cigna would harm customers in the national accounts market within the 14 states where Anthem operates under the Blue Cross and Blue Shield brand.