Cigna re­jects An­them takeover

Los Angeles Times - - MONDAY BUSINESS - By Chad Ter­hune chad. ter­hune@ latimes. com Twit­ter: @ chadter­hune

In a fiery re­sponse, Cigna Corp. re­jected a $ 54- bil­lion takeover bid from An­them Inc. and un­leashed sev­eral crit­i­cisms of the health in­sur­ance gi­ant.

Cigna said Sun­day that the $ 184- a- share of­fer was in­ad­e­quate and not in the best in­ter­ests of its share­hold­ers.

The na­tion’s fifth- largest health in­surer ex­pressed frus­tra­tion with An­them tak­ing its pri­vate ne­go­ti­a­tions public a day ear­lier and for fail­ing to ad­dress key is­sues such as the fall­out from a mas­sive data breach at An­them this year.

Cigna also ques­tioned An­them’s abil­ity to over­come an­titrust con­cerns raised by the deal and whether its chief ex­ec­u­tive was up to the task of lead­ing the com­bined com­pany.

All this comes amid an in­dus­try­wide scram­ble for merger part­ners that could dra­mat­i­cally re­shape the mar­ket for em­ploy­ers, con­sumers and gov­ern­ment pro­grams.

Health in­sur­ers are look­ing to grow in size to win bet­ter terms from med­i­cal providers and to max­i­mize prof­its as busi­ness changes un­der the Af­ford­able Care Act.

In its let­ter Sun­day to An­them’s board, Cigna ex­ecu- tives said that “we are deeply dis­ap­pointed with your re­cent ac­tions.”

It then listed sev­eral con­cerns such as “An­them’s lack of a growth strat­egy, com­pli­ca­tions re­lat­ing to your mem­ber­ship in the Blue Cross Blue Shield Assn. and the re­lated an­titrust ac­tions, and other sig­nif­i­cant chal­lenges, such as the mas­sive data breach you ex­pe­ri­enced in Fe­bru­ary.

spokes­woman for An­them de­clined to com­ment Sun­day on Cigna’s re­sponse.

On Satur­day, An­them said talks had bro­ken down over Cigna’s in­sis­tence that its chief ex­ec­u­tive, David Cor­dani, get the top job at the com­bined com­pany ei­ther im­me­di­ately or in the near fu­ture.

An­them said that its CEO, Joseph Swedish, would lead the merged com­pany for two years and then Cor­dani would get his op­por­tu­nity.

Cigna pointed out Sun­day that its man­age­ment team had out­per­formed An­them’s in rev­enue and profit growth in re­cent years.

“Your in­sis­tence that one per­son, Joseph Swedish, as­sume four roles, in­clud­ing chair­man of the board, CEO, pres­i­dent, as well as head of in­te­gra­tion, is dis­con­cert­ing and risky,” Cigna said in its let­ter.

An­them’s data breach af­fect­ing nearly 80 mil­lion Amer­i­cans was another stick­ing point.

Cigna ex­pressed worry about the “sys­tem fail­ure” that led to the breach and whether An­them could win back the public’s con­fi­dence.

“Data pro­tec­tion has be­come both a high- pro­file is­sue and a fo­cus of the public and gov­ern­men­tal agen­cies,” Cigna said. “Trust with cus­tomers and providers is crit­i­cal in our in­dus­try, and An­them has yet to demon­strate a path to­ward restor­ing this trust.”

Other big health in­sur­ers are also eye­ing deals.

Ana Gupte, a healthcare an­a­lyst at Leerink Part­ners, said she thinks An­them will be suc­cess­ful at buy­ing Cigna and that Aetna Inc., the na­tion’s third- largest health in­surer, will lock up Hu­mana Inc., a big player in pri­vately run Medi­care Ad­van­tage plans.

That would fur­ther con­sol­i­date mar­ket power among the three largest U. S. health in­sur­ers: Unit­edHealth Group Inc., An­them and Aetna.

An­them is Cal­i­for­nia’s big­gest for- profit health in­surer and leads en­roll­ment in the Cov­ered Cal­i­for­nia ex­change for in­di­vid­u­als.

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