Anthem CEO: Amid 'dynamic tension,' merger with Cigna is moving forward

The insurers announced plans to merge in July 2015

Following a Wall Street Journal report that disagreements between Anthem and Cigna officials could delay or disrupt antitrust approval of their planned merger, Anthem executives say they believe the deal is on track and will receive antitrust approval.

In July 2015, Anthem announced it had agreed to acquire Cigna for $54 billion. The combined company would have about 53 million customers, making it the nation's largest insurer in terms of enrollment. 

Anthem plans to buy Cigna in largest-ever insurance deal. Here's what it could mean.

The insurers argue that the merger would increase their negotiating power and help them better compete with larger companies. Several provider groups have opposed the merger, contending that the deal could reduce competition, lower payments to providers, and increase cost sharing for consumers.

The merger is subject to review by regulators in 26 states and the Department of Justice. Eleven of the states have already approved the merger, Anthem spokeswoman Jill Becher says.

Reports of tension

On Monday, the Journal reported that the companies were at odds with one another on several fronts.

Among the reported points of disagreement was Anthem's lawsuit against pharmacy benefit manager Express Scripts for allegedly overcharging for prescription drugs. The Journal cited an April letter from Cigna chair Isaiah Harris raising concerns that the suit could hurt the merger's prospects for regulatory approval.

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Liz Hoffman and Anna Wilde Mathews wrote for the Journal that while the merger agreement did not appear to be in danger of collapsing, the disagreements could harm the changes of antirust approval, "which are typically harder to obtain if both parties aren't in sync."

Some observers have pointed to signs they say indicate the merger might not occur. For instance, financial analysts note that Cigna's stock is trading well below Anthem's original $188 per share offer of cash and stock. That pricing indicates that "the probability of the deal is significantly less than 100 percent," Morningstar analyst Vishnu Lekraj tells Reuters.

Still, Lekraj says regulators likely will approve the proposal and the companies will merge "as long as management teams can get along and keep the deal intact."

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Anthem's response

Anthem CEO Joseph Swedish says his company had "dynamic tension" with Cigna regarding the merger, but says the companies have resolved the issues and are on track to move forward with the deal.

Swedish said the companies have "virtually met all the deadlines up to this point" required for antitrust review and likely will receive regulators' approval for the deal.

Tom Zielinski, Anthem's general counsel, adds that the companies "have worked through our differences of opinion" (Berkrot, Reuters, 5/24; Hoffman/Wilde Mathews, Wall Street Journal, 5/24; Hoffman/Wilde Mathews, Wall Street Journal, 5/23;  Japsen, Forbes, 5/25).

Six classic mistakes organizations make in M&A deals

We're in the throes of the largest bout of consolidation in the health care industry in the last 35 years—and yet, nearly 60 percent of M&A deals don't result in a competitive edge. In fact, about 1 in 5 hospitals start to lose money within two years of the transaction.

In this clip, corporate strategy expert Tom Cassels debunks six myths about M&A strategy, such as the belief that CEOs can manage M&A on top of their other responsibilities, and that you don't have to start planning for integration until the deal is signed.


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