Cigna Corp. stockholders accused the company's chief executive and board members of sabotaging its $54 billion merger with Anthem after he allegedly learned he wouldn't be CEO of what would've been the largest insurer in the country, according to a new lawsuit.
Cigna CEO David Cordani allegedly hired "black ops style" consultants to derail the deal, which also prevented Cigna from collecting a $1.85 billion reverse termination fee, the Massachusetts Laborers' Annuity Fund claimed in a lawsuit unsealed in Delaware Chancery Court on Monday. The Delaware Chancery Court ruled in August that neither Cigna nor Anthem may recover any damages stemming for the deal that collapsed in 2017.
Cigna investors are seeking unspecified damages, the establishment of executives' liability for the alleged mismanagement and the return of the executives' alleged ill-gotten gains produced by their purported breach of fiduciary duties, among other requests.
"After a management team tried—but failed—to thwart an unsolicited takeover bid that they knew would result in their own terminations, and after the stockholders voted overwhelmingly to approve the deal, the management team took steps to blow up the transaction, including the secret hiring of a consulting firm for the sole purpose of derailing the transaction before it could close," according to the complaint, which detailed how "the board supported (Cordani's) sabotage and placed Cordani's personal interests over the best interests of the company and stockholders."
Cigna and Anthem did not reply to requests for comment.
After initial unsuccessful attempts to allegedly win over Anthem's board and "oust" then-Anthem CEO Joseph Swedish, Cordani allegedly deployed the consulting firm Teneo, which is a defendant in the suit. All of the firm's advice and assistance worked against the deal, according to the lawsuit, which accused Teneo of leaking confidential information to news organizations to cast Anthem in a negative light.
"Cigna's fiduciaries took pains to hide their disloyalty, such as making misleading public statements, proffering non-credible testimony, and shielding Teneo's purpose and work from public view," the complaint reads.
The companies struck a deal to combine in 2015 but the relationship quickly soured. Cordani believed that while Anthem would technically acquire Cigna, Cigna would take control of the combined organization. Anthem and its executives seemingly saw it differently, and couldn't come to a compromise.
Cigna and Anthem sued each other for billions of dollars after their agreement collapsed, both arguing that the other derailed the merger.
Vice Chancellor J. Travis Laster wrote in August that Anthem proved Cigna breached its obligation by withdrawing from integration planning, opposing divestitures, resisting mediation and undermining Anthem's defense during the antitrust litigation, which eliminated its right to a termination fee. Even if the deal had closed, Cigna proved that the Justice Department would have still sought to break it up given the combined entity's market share and potential competitive imbalance, Laster said.
