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Anthem, Cigna make progress toward merger deal

Talks between two insurers had gotten heated following public takeover bid

Anthem and Cigna "seem to be making progress toward a deal" following the news of Aetna's planned acquisition of fellow health insurer Humana, CNBC's David Farber reports.

Talks stalled between the two major insurers when Anthem announced its takeover offer to Cigna, prompting Cigna's board of directors to reject the deal and chide Anthem for its "deeply disappointing" tactics. After Aetna and Humana announced their deal, many predicted that Anthem-Cigna negotiations would resume given that both companies' potential acquisition targets had narrowed.

Yet the fact that Cigna's top alternative to an Anthem deal--Humana--is off the table puts it in a difficult negotiating position, investment expert Louis Navellier writes in a piece for InvestorPlace. Anthem could even play hardball and lower its offer, leaving Cigna to make the tough decision of whether to hold out for a better offer.

Among the sticking points Cigna identified were concerns about the proposed leadership of a combined company. "Your insistence that one person (Joseph Swedish) assume four roles, including Chairman of the Board, CEO, President, as well as Head of Integration, is disconcerting and risky," Cigna's board wrote to Anthem. Cigna preferred that its own CEO, David Cordani, play a more active leadership role.

Now it appears Cigna has backed down from that demand, Farber reports, adding that the two companies "have largely dealt with governance issues" that previously had held up the deal.

But there are plenty of other factors that could derail an Anthem-Cigna deal, Farber notes. While UnitedHealth Group, the nation's largest insurer, would be sitting pretty regardless of whether it makes an acquisition, it's still a remote possibility that it could mount a bid for Cigna, Farber says, though both he and Navellier indicated such a deal isn't likely.   

Regarding antitrust issues, if Anthem and Cigna reach a deal soon, it's likely that federal regulators would consider both that merger and the Aetna-Humana deal at the same time, Farber says, adding, "they may even run them against each other" when deciding which, if any, deals to approve. Aetna CEO Mark Bertolini had said he hoped his company and Humana could get an edge with regulators by making the first merger move, FierceHealthPayer reported.

To learn more:
- watch Farber's report
- read the InvestorPlace piece

Related Articles:
Cigna, Anthem trade barbs over 'deeply disappointing' takeover bid
Anthem won't back down on bid to take over Cigna
Cigna, Anthem CEOs can't see eye-to-eye
Aetna acquires Humana for $37B
Merger madness: What takeover bids mean for the health insurance industry
However health insurance deals shake out, UnitedHealth likely to come out on top
Deconstructing health insurance merger fever: 3 major issues