Anthem, near deadline on Cigna deal, looks to buy time in Delaware court

16 March 2017. By Curtis Eichelberger.

Anthem and Cigna's proposed merger is running out of time, which is why May 8 has emerged as a key date on Anthem's trial schedule — perhaps even more important than the company's hearing before the US Court of Appeals for the DC Circuit next Friday.

Anthem has two ways to get regulatory approval for its $54.2 billion acquisition of health insurer Cigna, which was blocked by the US District Court last month: it can get a reversal in the appellate court, which could potentially set up a Supreme Court showdown. Or, it can cut a deal with the new, and still unnamed, antitrust leadership at the Department of Justice.

What threatens these plans is the April 30 termination date contained in the original merger agreement.

It is vanishingly unlikely that Anthem can win a reversal, get regulatory approval from all the states, have the case remanded to the district court for further consideration of aspects the judge didn't address in her initial ruling, and perhaps get through an appeal of that ruling, followed by a date with the Supreme Court … all in six weeks.

So regardless how the hearing goes in appellate court, Anthem's lifeline rests in convincing a Delaware judge that Cigna violated the agreement, and by doing so can no longer hold Anthem to the April 30 deadline.

"Cigna's obvious efforts to sabotage the merger have been recognized by both the District Court and the national media," Anthem said when it filed its suit against Cigna on Feb. 15. "As the District Court noted, it could not ignore the 'elephant in the courtroom,' and the fact that Cigna was 'actively warning against' the merger and that 'Cigna officials provided compelling testimony undermining' Anthem's defense."

Cigna had sued Anthem a day earlier, also in Delaware court, seeking declaratory judgment that it had lawfully terminated the merger agreement and that Anthem is not permitted to extend the termination date. The company also sought payment of a $1.85 billion reverse termination fee, plus $13 billion in damages.

The Delaware court issued a temporary restraining order preventing Cigna from walking away from the deal and set a hearing for the week of April 10. But that date was pushed back to May 8, giving the appellate court a chance to rule first, and allowing Anthem time to pursue talks with the government.

Assuming no resolution beforehand, Anthem's battle to buy time will be fought in the quaint little town of Wilmington, Delaware, roughly midway between the nation's capital in Washington, DC, and America's symbol of capitalism, New York City.

Game not over

Although the odds are long for Anthem, there is a path for the health insurer to win the day.

J. Travis Laster, Vice Chancellor on the Delaware Court of Chancery, said so himself the day he issued a temporary restraining order to stop Cigna from withdrawing from the deal. In response to a comment from Cigna lawyer William Savitt that "as certain as the day is long," Anthem wouldn't be able to obtain all its regulatory approvals by the April 30 merger deadline, Laster said:

"We've seen the [Cleveland] Cavaliers come back from a 3-1 deficit for the first time in NBA history," the judge said. "We've seen the [Chicago] Cubs come back from a 3-1 deficit to win their first World Series in over a century.

"[And] we've seen the [New England] Patriots come back from a 28-3 deficit to win the Super Bowl for the first time in overtime. This is a year where the new administration that [Anthem lawyer Glenn Kurtz] wants to deal with was not predicted by virtually any political pundit. … I don't think [someone] can reasonably posit and be 'certain as the day is long' that there is no chance for this merger to get approved.

"Yeah, there might be no chance for it to get approved in a traditional fashion, but there are untraditional things that are available, and Mr. Kurtz has identified some routes short of a full-blown appeal followed by state-by-state approval that he thinks theoretically could get him there."

One of the untraditional ways Laster was talking about was for Anthem to cut a deal with the DOJ, something that might require input from the administration. Though it would buck tradition for a president to get involved in an antitrust review, attorneys say, US President Donald Trump has proven that he is a nontraditional leader.

Anthem Chief Executive Joseph Swedish recently threw his support behind Trump's American Health Care Act, and he spoke with the president and Secretary of Health and Human Services Tom Price by telephone Tuesday.

The White House, Anthem and HHS wouldn't say what was discussed at the meeting.

Whether Anthem can win its appeal or not, everything is about the clock. And that won't be settled in a packed federal court in Washington, DC, a week from Friday. Rather, if the deal is still alive, the issue will be resolved in a much less talked about hearing May 8 in Delaware at 10 am.

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