Cigna preps Plan B in face of potential Anthem merger dissolution
- Cigna CEO David Cordani met with investors this week to discuss the beleaguered $48 billion Anthem acquisition, Bloomberg reported.
- While Bloomberg's Zachary Tracer reported Cordani continues to support the merger, he is still investigating a Plan B if the merger doesn't go through thanks to the pending Justice Department suit.
- Anthem’s takeover of Cigna is already on shaky ground. Cigna is "no longer interested in being pursued," Christopher Curran, Anthem's lawyer, was quoted in Bloomberg this week, adding, "Speed is essential."
Plan B, according to notes from Wolfe Research and Goldman Sachs Group, could include "stock buybacks and acquisitions," Bloomberg reported. By the first half of 2017, Cigna could potentially have $5 billion to play with and explore different acquisitions or share buybacks, Tracer reported.
The Anthem/Cigna merger will always intrinsically be tied to the pending $37 billion Humana/Aetna merger due to the timing of announcements and the fact that both pending mergers would significantly decrease competition within the health insurance market.
The Humana/Aetna merger -- from an outsider's perspective -- seems go be going swimmingly. For example, Aetna hired an integration specialist to smooth the transition. On the other hand, there have been reports that Cigna and Anthem largely skipped the honeymoon period of the merger, leading to the pair to put on a good face for the public as they fight behind closed doors.
This May, the pair quietly accused each other of violating their merger agreement and dropping the ball on paperwork and deadlines to regulators, according to The Wall Street Journal. In addition, Anthem accused Cigna of keeping back corporate information key to their proposal out of concern that they're still rivals.
In July, Cigna remarked after DOJ filed their lawsuit against the merger, "In light of the DOJ’s decision, we do not believe the transaction will close in 2016 and the earliest it could close is 2017, if at all."
The need for (a) speed(y trial)
On Friday, Judge John Bates of the U.S. District Court for the District of Columbia split the pending Justice Department investigations into the two cases. He will hand over the Anthem/Cigna case to U.S. District Judge Amy Berman Jackson. The move was done to increase chances the trials can be completed before the year's end.
However, no trial date has been actually set for either case and the clock is ticking over the Anthem/Cigna merger as Cigna reportedly is cooling to the idea of an acquisition. Anthem and Cigna have until April 30, 2017 to seal the deal or extend their merger deadline. Anthem believes the DOJ suit needs to be completed before the year's end to give the insurers four months to gain all of the state approvals needed to complete the merger.
What Plan B talks could mean
“This is a sign that Cigna doesn’t think that the deal’s going to happen,” Les Funtleyder, healthcare portfolio manager at New York-based E Squared Asset Management, told Bloomberg's Tracer, adding, “Why would you take the time and expense to meet with investors if you thought that in the short term there was going to be a transaction?”
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