Aetna, Humana Abandon $37 Billion Merger Blocked by US Judge
15 February, 2017, 00:30 | Author: Paula Vaughn
Aetna and its rival Humana have terminated their agreement to merge, after the deal worth $34 billion was blocked in federal court due to antitrust problems.
In 2015 and 2016, Aetna spent $775 million in transaction and integration-related fees, according documents filed with the U.S. Securities and Exchange Commission. The U.S. District Court ruling will make it hard for large insurance mergers to take place in the Medicare Advantage market, where Aetna and Humana have a major presence. Hartford, Connecticut-based Aetna said it made a decision to quit the exchanges in 2017 purely for financial reasons, but Bates did not buy that argument. The company delayed offering a forecast for 2017, saying that they would provide an update on the proposed $37 billion acquisition by Aetna in a conference call no later than February 16. Aetna also gave up its proposal to sell Medicare Advantage assets to Molina Healthcare Inc.
Connecticut-based Cigna Corp. (NYSE: CI) says it has terminated the proposed $54 billion merger with Indianapolis-based Anthem Inc.
"Cigna believes that the transaction can not and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna's shareholders", the Connecticut-based company said in a written statement.
Both companies would have combined to form the second-largest health insurer in the US. Some analysts predict that Humana will use the extra cash to pay shareholders or fund other potential deals. Federal judges rejected both deals in separate rulings earlier this year.
But don't point the finger at us for this, the statement implies: It was Anthem that was in charge of the "full responsibility to lead the federal and state regulatory approval process, as well as the litigation strategy", so you can feel free to blame Anthem.
Anthem, which has until April 30 to complete its takeover of Cigna to avoid a $1.85 billion termination fee, has vowed to appeal.
The decision to scrap the tie-up marks the latest corporate casualty of the former Obama administration's decision to challenge corporate mergers on anti-competition grounds and seek to block so-called tax inversion deals based on contentions they take unfair advantage of tax loopholes and would erode the nation's tax base.
"The evidence has shown that the merger is likely to result in higher prices", U.S. District judge Amy Berman Jackson wrote in the ruling.
Within this framework, General Motors and PSA Group regularly examine additional expansion and cooperation possibilities, as well. Investors applauded the rekindling of the sale concept, driving GM shares up 4.3% to $37.05 in pre-market trading Tuesday.
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