RiskDecember 2, 2020

Pension Fund Sues Cigna over Failed Anthem Merger

Lawsuit alleges Cigna’s CEO tried to sabotage the $54 billion merger when he found out he wouldn’t lead the new company.

Reported by Michael Katz

A Massachusetts pension fund is suing health insurance provider Cigna, claiming its executives and directors tried to sabotage a $54 billion takeover bid by Anthem Inc. out of their own self-interests.

The Massachusetts Laborers’ Annuity Fund accused Cigna CEO David Cordani and the company’s board of using “black-ops style” tactics in a “Trojan horse” campaign to thwart the merger with Anthem Inc. from the inside.

In 2015, Anthem proposed a plan to acquire Cigna for $54 billion, but, the following year, the US Justice Department sued to block the merger, saying it would lead to higher costs for employers and consumers. After the deal collapsed in 2017, Anthem contended that Cigna breached its obligations and sought damages of $21.1 billion. At the same time, Cigna argued that Anthem breached its obligations and sought damages of $14.7 billion, and separately sought to recover a $1.85 billion reverse termination fee.

According to court documents, Cordani was originally in favor of a deal with Anthem, but he is accused of changing his mind and trying to poison the merger deal when he found out he would not be the CEO of the combined company. Cigna had insisted Anthem pay a significant premium for the deal, which it agreed to do, but only if its CEO would serve as the new CEO of the combined companies.

“The board supported his sabotage and placed Cordani’s personal interests over the best interests of the company” in order “to protect their jobs at the expense of stockholders,” says the unsealed lawsuit, according to Bloomberg News. “With the deal pending and the parties required to work cooperatively to gain regulatory approval, Cordani chose to poison the process to ensure the deal’s failure.”

The lawsuit also alleges “Cigna’s fiduciaries took pains to hide their disloyalty, such as making misleading public statements” and “proffering non-credible testimony.”

The pension fund also claims Cordani hired public relations firm Teneo, which it names as a defendant and says is “skilled in the darker arts of influencing the media,” to foil the merger while making it look like Cigna was trying to make it work. The fund is seeking unspecified damages to be returned to the company on behalf of all Cigna investors.

Cigna did not respond to requests for comment.