What Does A Court Blocking Aetna's Humana Deal Mean For Anthem And Cigna's Merger?

Shares of both Aetna Inc AET and Humana Inc HUM are trading down on Monday after a federal judge blocked the massive $37 billion proposed merger between the two healthcare insurance giants on antitrust grounds.

However, Aetna and Humana may not be the only victims of the ruling. Shares of CIGNA Corporation CI and Anthem Inc ANTM are down as well on growing concerns that their proposed merger may be next in line to get nixed.

“If the judge blocked this deal, there is very little, if any, chance that the Anthem-Cigna deal gets cleared,” Bloomberg Intelligence analyst Jason McGorman explained. According to McGorman, both analysts and investors had given the Aetna/Humana merger a higher probability of success than the proposed $48 billion Anthem/Cigna deal.

Back in August, Moody’s Investors Service determined that the Aetna/Humana deal was likely to ultimately be approved, whereas the Anthem/Cigna deal would likely not be.

To make matter worse, court testimony has revealed that Anthem and Cigna may not even be on the same page when it comes to their proposed merger. Cigna, which is set to be paid a $1.85 billion breakup fee if the merger doesn’t go through, apparently stopped participating in certain integration plans on the advice of its lawyers.

The government presented its closing arguments in the Anthem/Cigna case on December 13, and the fate of the merger now rests in the hands of U.S. District Judge Amy Berman Jackson.