Anthem, Cigna Rise After U.S. Says Open to Settlement Offer

Updated on
  • U.S. willingness to hear antitrust proposals isn’t unusual
  • Judge says she won’t rule on $48 billion merger by end of year

The Justice Department is open to hearing settlement offers from Anthem Inc. to resolve an antitrust lawsuit seeking to block the insurer’s $48 billion takeover of rival Cigna Corp., a government lawyer said.

“We’re always willing to hear any proposals the defendants have,” Jon Jacobs, a lawyer for the Justice Department, said at a court hearing on Friday in Washington.

It’s common for the government to express a willingness to entertain settlement offers, and Jacobs’s remarks are no guarantee that an agreement can be reached.

“Of course the DOJ is going to always be willing to engage in discussions,” said Jennifer Rie, an antitrust analyst at Bloomberg Intelligence in New York. “I still think it’s hard to understand what the fix would be for all the issues that were raised by the Anthem-Cigna deal.”

Cigna’s shares rose 4.3 percent to $132 and Anthem was up 1.6 percent to $130.21 at 1:43 p.m. in New York.

Antitrust Suits

The Justice Department’s antitrust division sued last month to block the Anthem-Cigna tie-up and the separate $37 billion merger of Aetna Inc. and Humana Inc., contending that the combinations, which would reduce the number of national health insurers from five to three, would harm competition and undermine choice for consumers. The Aetna case is scheduled to go to trial starting on Dec. 5.

Lawyers for the government and for Anthem and Cigna appeared before U.S. District Judge Amy Berman Jackson to set a schedule for the litigation. She said the trial would probably begin in mid- to late November and that she couldn’t rule on the case before the end of the year. She didn’t set a specific start date for the trial at the hearing.

A November start date would be later than Anthem’s proposed timeline. Anthem said it needed a year-end decision so it would have time to get state regulatory approvals by the merger deadline of April 30. While the companies can agree to extend the deadline, either one can also walk away then. Cigna won’t extend that date, Anthem has said.

“We do take the position that that April 30 date is fixed,” Anthem lawyer Christopher Curran said.

Government’s Push

The Justice Department opposed that schedule, saying that starting anytime this year would compromise its ability to prepare and argue its case. The merger deadline is within the companies’ control and can be extended, the government argues.

Rick Rule, a lawyer for Cigna, told the judge that he “can’t say” whether Cigna would terminate the merger agreement on April 30 if it doesn’t close by then but that the health insurer is committed to defending the combination in court.

“I can’t speculate as to what Cigna’s board will do on April 30,” he said.

In a note to investors, analyst Ana Gupte of Leerink Partners the Justice Department’s offer to hear settlement proposals “is clearly a surprise.” Gupte added that Leerink, and probably the rest of Wall Street, have viewed the probability of a successful trial or settlement at 25 percent or lower.

The case is U.S. v. Anthem Inc., 16-cv-1493, U.S. District Court, District of Columbia (Washington).

— With assistance by Zachary Tracer

(Updates comments from hearing starting in ninth paragraph.)
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