Shares of the two companies rise as the Department of Justice lawyer shows openness to reach a settlement over the case

Published By: Eunice Gettys on August 13, 2016 08:56 am EST

Anthem Inc. (NYSE:ANTM) and CIGNA Corporation (NYSE:CI) earlier proposed to merge the operations of the two health care providers. The merger was subject to much criticism from the US Department of Justice. However, in recent news, the Justice Department lawyer has shown some interest in reaching a settlement agreement.

According to the two healthcare providers, the Anthem acquisition of Cigna would create a premium global health benefits company and would help them in becoming the most valued health partner in the US. Their aim is to transform the health care delivery system for its consumers by providing them with more affordable and easily accessible choices. In this way, no other company would be considered to be better positioned to compete with insights given by this merger. The companies have aimed to work together to deliver lower cost and innovative health benefits solutions to its consumers.

However, the merger was subject to much criticism from the Justice Department. The department had sued to bring the merger that was worth $53 million to a standstill. The Justice Department halted the deal because it believes that the merger would constitute a monopoly, thus significantly reducing competition in the health insurance market. Also, it would reduce the number of players in the market from five to three, limiting choices for the consumers.

Following this accusation, the Indiana-based company argued that the deal was precompetitive and would allow Anthem to increase its presence in the Affordable Care Act’s insurance segments. It would make it easier for consumers to access the insurance exchanges as the company plans to enter nine new states post-acquisition. Also, it would lower the costs to the consumers and would enable them to enter untouched markets. Due to these advantages, the company had requested the Department of Justice to reconsider the case and set a trial date in October of this fiscal year.

To its surprise, the Justice Department lawyer, appointed to look over the case, has recently stated that the department was open to the settlement offers. This led the shares of the two companies to rise in the market. Since the news surfaced the market on Thursday, August 12, Anthem and Cigna shares are trading up in the market at 1.55% and 5.25%, respectively.

Following the requests made by the $34.28 billion company, Leerink Analyst Ana Gupte has commented that Judge Allison Berman Jackson has set the start date for the trials to be somewhere in mid-late November this year. The projected date is earlier than the trial date set for Atena-Humana case of December 5. However, the judge is not likely to pass a ruling for Anthem-Cigna case before the end of FY16.

Due to this, the health insurance provider has extended the merger agreement with the Connecticut-based company till April FY17 after which either of the companies can walk away if they want. However, the two companies are keen to work together for defending the case in the court. According to the analyst, the Street has maintained a success probability at 25% for this trial, based on which the shares have risen in the market.