NEW YORK Anthem Inc (ANTM.N) on Friday called off a $54 billion (41.89 billion pounds) deal to buy Cigna Corp (CI.N), one day after the second-largest U.S. health insurer lost a Delaware business court ruling that could have kept alive the chances of a combination.
The fight over a $1.85 billion merger break-up fee will go on as Anthem insists that it will not pay, and Cigna claims it is owed more than that amount, including damages.
Anthem and Cigna have been in legal disputes since the U.S. Justice Department won its case to block the merger that would have created the largest U.S. health insurer.
Cigna, ranked No. 5 in the industry, was suing in Delaware to terminate the merger while Anthem pursued appeals of the antitrust decision. Court documents show the companies were at odds even before the government decision.
"Cigna's repeated wilful breaches of the merger agreement and its successful sabotage of the transaction has caused Anthem to suffer massive damages," Anthem said in a statement.
Cigna said it was seeking prompt payment of the termination fee and that it would pursue its claims for additional damages. Cigna said it would also immediately increase its share buyback activity.
"Not a surprise that this failed marriage is ending in litigation," JP Morgan analyst Gary Taylor wrote in a research report. The key question, he said, is if Cigna would consider moving forward on a new deal with another insurer before resolving new termination-fee related litigation.
Anthem and Cigna announced the deal in July 2015. About a year later, the Justice Department sued to block that and a merger between Aetna Inc (AET.N) and Humana Inc (HUM.N).
Anthem shares fell 0.7 percent, or $1.28, to close at $181.44. Cigna was off 1.1 percent, or $1.84, at $161.98.
(Reporting by Caroline Humer; editing by Dan Grebler and Richard Chang)