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Cigna rebuffs Anthem’s “deeply disappointing” proposal

June 22, 2015, 12:29 AM UTC
Anthem offered $47 billion to buy Cigna
Photograph by Aaron P. Bernstein—Getty Images

(Reuters) – Health insurer Cigna Corp rebuffed Anthem Inc’s $47 billion merger proposal on Sunday, saying it was “deeply disappointed” with Anthem’s recent actions and the offer was not in the best interest of shareholders.

Anthem’s offer for smaller rival Cigna is part of a daisy chain of potential deals in the health insurance sector. The biggest players are seeking acquisitions to boost membership in government-paid healthcare plans and employer-based insurance. The bigger the insurer, the more negotiating power it has with prices and improving its doctor networks.

Cigna Chairman Isaiah Harris, Jr. and Chief Executive David Cordani wrote a letter to Anthem’s board outlining reasons why the company was rejecting Anthem’s stock and cash offer. The list included Anthem’s “lack of growth strategies,” complications related to its membership of Blue Cross Blue Shield Association and its “massive” data breach in February.

“We have attempted to engage in dialog so that we can understand and consider these issues,” the letter said. “Unfortunately, you have continued to avoid addressing these key concerns and have failed to demonstrate what has changed over the past few months.”

Anthem, the second-largest U.S. health insurer, said in a statement on Saturday that had made four offers for Cigna in June.

Cigna’s board is also concerned over Anthem’s “insistence” that one person – Joseph Swedish, Anthem’s president and CEO – assume four roles of the combined company: chairman, CEO, president and head of integration.

“Your proposal raises very serious questions regarding your views on proper governance, board oversight and risk management and underestimates the complexity of combining our organizations.”

A representative for Anthem was not immediately available to comment.

In another strand of the consolidation efforts, Cigna and Aetna Inc are vying to acquire Humana Inc., according to sources.

Anthem’s Swedish published a letter on Saturday that said it doubted that investors supported Cigna’s rejection over Anthem’s refusal to guarantee that the CEO role would go to Cordani. Cigna, according to Swedish’s letter, had also refused to sign a two-week standstill agreement with Anthem that would prevent both sides from having other deal talks.

Reporting by Jennifer Saba in New York; Editing by Nick Zieminski and Frances Kerry.