US: Judge rejects Anthem’s $54 billion takeover of Cigna

A federal judge halted Anthem’s bid to acquire Cigna for $54 billion this evening, ruling the deal between the insurance giants can’t go forward because it would illegally hurt competition.

US District Judge Amy Berman Jackson concluded that the merger, which would create the country’s largest insurance company, would stifle competition for large employers in a market dominated by just four insurers, including Anthem and Cigna.

The Justice Department successfully argued that the deal would eliminate an innovative, growing competitor in Cigna, and that the savings promised by Anthem were either illusory or not contingent on the merger.

The federal government further argued that acrimony between the would-be partners — which has persisted for at least a year — undercut their claims about savings resulting from the deal.

Anthem had argued that the merger would create $3 billion in savings that would largely be passed on to customers through lower rates. The company also pointed to emerging competitors, including private insurance exchanges, as evidence that there would continue to be vigorous competition for national accounts.

The arguments were ultimately unsuccessful. “The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects: it will eliminate the two firms’ vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market,” the court’s summary read.

Anthem can appeal the ruling, but it faces a tight timeline. At the end of April, either of the merging companies can pull the plug on the deal, and Cigna is expected to do so immediately. That would trigger a $1.85 billion breakup fee that Anthem would owe to Cigna.

Full Content: The Wall Street Journal

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