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`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
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`ANTHEM, INC.
`
`Plaintiff,
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`v.
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`CIGNA CORPORATION,
`
`Defendant.
`
`Case No. 2017-0114-JTL
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`
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`
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`PLAINTIFF’S MEMORANDUM OF LAW
`IN SUPPORT OF ITS MOTION FOR A TEMPORARY
`RESTRAINING ORDER AND TO EXPEDITE PROCEEDINGS
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`
`MORRIS, NICHOLS, ARSHT & TUNNELL LLP
`William M. Lafferty (#2755)
`Kevin M. Coen (#4775)
`D. McKinley Measley (#5108)
`Richard Li (#6051)
`Jason Z. Miller (#6310)
`1201 N. Market Street
`P.O. Box 1347
`Wilmington, DE 19899-1347
`(302) 658-9200
`Attorneys for Plaintiff Anthem, Inc.
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`
`
`
`
`
`OF COUNSEL:
`
`Glenn M. Kurtz
`Claudine Columbres
`Robert E. Tiedemann
`Jesse L. Green
`WHITE & CASE LLP
`1155 Avenue of the Americas
`New York, NY 10036
`(212) 819-8200
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`
`REVISED PUBLIC VERSION
`E-Filed February 23, 2017
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`
`
`EFiled: Feb 23 2017 11:01AM EST
`Transaction ID 60247625
`Case No. 2017-0114-JTL
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`
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`

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`
`
`TABLE OF CONTENTS
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`Page
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`C.
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`D.
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`2.
`
`3.
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`PRELIMINARY STATEMENT ............................................................................... 1
`FACTUAL BACKGROUND ..................................................................................11
`A.
`The Benefits Of Transformative Merger ............................................. 11
`B. Despite The Obvious Benefits To Their Shareholders And
`Customers, Cigna’s Board And Senior Management Were
`Opposed To The Merger From The Outset ......................................... 13
`Cigna Was Required To Use Its Reasonable Best Efforts To
`Obtain Regulatory Approval ............................................................... 13
`Cigna Failed To Use Reasonable Best Efforts To Obtain
`Regulatory Approval ........................................................................... 17
`1.
`Cigna Refused To Assist Anthem’s Best Efforts To
`Obtain Regulatory Approval Without Litigation ...................... 17
`Cigna Blocked Settlement Opportunities With The DOJ ......... 17
`a.
`Cigna Thwarted Any Opportunity to Settle With
`The DOJ Through Divestitures By Refusing To
`Sign Non-Disclosure Agreements And Provide
`Necessary Due Diligence ................................................ 18
`Cigna Thwarted Any Opportunity To Settle With
`The DOJ Through Mediation ......................................... 19
`Cigna Refused To Defend The Merger ..................................... 20
`a.
`Cigna Refused To Communicate Support For The
`Merger ............................................................................. 20
`Cigna Delayed Filing An Answer .................................. 20
`Cigna Refused To Provide Any Pre-Trial
`Assistance ....................................................................... 20
`Cigna Impeded Anthem’s Integration Efforts And
`Undermined Anthem’s Efficiencies Defense ................. 21
`Cigna Then Supported Broad Disclosure Of
`Private Letters To The DOJ In An Effort To Help
`The DOJ Block The Merger .......................................... 23
`
`b.
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`b.
`c.
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`d.
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`e.
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`

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`E.
`F.
`
`C.
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`Cigna Helped The DOJ Block The Merger At Trial ...... 24
`f.
`Cigna Was Successful In Sabotaging The Merger .............................. 28
`Anthem Has Appealed The Opinion, As Required; Cigna Has
`Refused To Do So ............................................................................... 29
`Cigna Has Purported To Terminate The Merger Agreement ............. 30
`G.
`Cigna Has No Right To Terminate The Merger Agreement .............. 31
`H.
`ARGUMENT ...........................................................................................................31
`I.
`ANTHEM IS ENTITLED TO A TRO PRESERVING THE MERGER
`AGREEMENT AND TO EXPEDITED PROCEEDINGS ...........................33
`A. Anthem Will Suffer Imminent And Irreparable Harm If The
`Merger Agreement Is Terminated ....................................................... 33
`B. Anthem Has Demonstrated Colorable Claims .................................... 38
`1.
`Anthem Extended The Termination Date Through April
`30, 2017 ..................................................................................... 39
`Cigna Has No Right To Terminate The Merger
`Agreement ................................................................................. 40
`a.
`Cigna Breached The Best Efforts Provision ................... 40
`b.
`Cigna’s Failures To Fully Perform Proximately
`Caused Or Resulted In The Failure Of The Merger
`To Be Consummated By The Termination Date ............ 46
`The Balance Of Hardships Heavily Favors Issuance Of A TRO
`And Expedition .................................................................................... 48
`II. ANTHEM HAS PROCEEDED PROMPTLY IN SEEKING A TRO ..........51
`CONCLUSION ........................................................................................................52
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`2.
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` ii
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`

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`TABLE OF AUTHORITIES
`
`
`CASES
`Alliance Data Sys. Corp. v. Blackstone Capital Partners V L.P., 963
`A.2d 746 (Del. Ch. 2009) ................................................................................... 40
`
`Page(s)
`
`AM Gen. Holdings LLC v. Renco Grp., Inc., 2012 Del. Ch. LEXIS
`289 (Del. Ch. Dec. 10, 2012) ........................................................................ 33, 37
`
`CBOT Holdings Inc. v. Chicago Bd. Options Exch., Inc., 2007 WL
`2296356 (Del Ch. Aug. 3, 2007) ........................................................................ 31
`
`Gaines v. Narachi, 2011 Del. Ch. LEXIS 157 (Del. Ch. Oct. 6, 2011) .................. 32
`
`Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715 (Del.
`Ch. 2008) ......................................................................................................passim
`
`Hollinger Int’l v. Black, 844 A.2d 1022 (Del. Ch. 2004) ........................................ 35
`
`Hough Assocs. v. Hill, 2007 Del. Ch. LEXIS 5 (Del. Ch. Jan. 17,
`2007) ................................................................................................................... 37
`
`In re Adelphia Commc’ns Corp., 361 B.R. 337 (S.D.N.Y. 2007) ........................... 36
`
`In re Del Monte Foods Co. S’holders Litig., 25 A.3d 813 (Del. Ch.
`2011) ................................................................................................................... 33
`
`In re Estate of Drake, 4 A.3d 450 (D.C. 2010)........................................................ 46
`
`Ixe Banco, S.A. v. MBNA Am. Bank, N.A., 2009 U.S. Dist. LEXIS
`89979 (S.D.N.Y. Sept. 29, 2009) ........................................................................ 46
`
`Jacobs v. Tenneco W., 186 Cal. App. 3d 1413 (Cal. Ct. App. 1986) ...................... 47
`
`Kan. City S. v. Grupo TMM. S.A. de C.V., 2003 Del. Ch. LEXIS 116
`(Del. Ch. Nov. 4, 2003) ................................................................................ 38, 51
`
`Narrowstep, Inc. v. Onstream Media Corp., 2010 Del. Ch. LEXIS 250
`(Del. Ch. Dec. 22, 2010) ..................................................................................... 41
`
`
`
`
` iii
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`

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`Oracle Corp. v. Peoplesoft, Inc., 2003 Del. Ch. LEXIS 223 (Del. Ch.
`Nov. 10, 2003) .................................................................................................... 34
`
`Renco Grp., Inc. v. MacAndrews AMG Holdings LLC, 2013 Del. Ch.
`LEXIS 7 (Del. Ch. Jan. 18, 2013) ....................................................................... 32
`
`Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173
`(Del. 1986) .................................................................................................... 34, 35
`
`Singh v. Batta Envtl. Assocs., 2003 Del. Ch. LEXIS 59 (Del. Ch. May
`21, 2003) ............................................................................................................. 34
`
`SLC Beverages, Inc. v. Burnup & Sims, Inc., 1987 Del. Ch. LEXIS
`472 (Del. Ch. Aug. 20, 1987) ....................................................................... 37, 49
`
`T. Rowe Price Recovery Fund, L.P. v. Rubin, 770 A.2d 536 (Del. Ch.
`2000) ................................................................................................................... 33
`
`Topspin Partners, L.P. v. Rocksolid Sys., Inc., 2009 WL 154387 (Del.
`Ch. Jan. 21, 2009) ............................................................................................... 32
`
`True N. Commc’ns Inc. v. Publicis S.A., 711 A.2d 34 (Del. Ch.
`1998) ................................................................................................. 33, 34, 35, 37
`
`Vitalink Pharm. Servs. v. GranCare, Inc., 1997 Del. Ch. LEXIS 116
`(Del. Ch. Aug. 7, 1997) ...................................................................................... 49
`
`Wavedivision Holdings, LLC v. Millennium Dig. Media Sys., L.L.C.,
`2010 Del. Ch. LEXIS 194 (Del. Ch. Sept. 17, 2010) ................................... 45, 46
`
`Wynnefield Ptnrs. Small Cap Value L.P. v. Niagara Corp., 2006 Del.
`Ch. LEXIS 144 (Del. Ch. Aug. 9, 2006) ............................................................ 36
`
`
`
`
` iv
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`Pursuant to Rule 65 of the Court of Chancery Rules, Plaintiff Anthem1 by
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`and through its undersigned counsel, hereby submits this Memorandum of Law in
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`support of its Motion for Temporary Restraining Order (“TRO”) and to Expedite
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`Proceedings (the “Motion”).
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`PRELIMINARY STATEMENT
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`On July 23, 2015, Anthem and Cigna entered into the Merger Agreement to
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`create a combined company that would transform health care for consumers by
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`enhancing health care access, quality and affordability. At the time of signing the
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`Agreement, Anthem agreed to pay consideration of over $54 billion, providing
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`Cigna’s shareholders with a premium of 38.4%, or $13.4 billion, to the unaffected
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`stock price as of May 28, 2015. Approximately 99% of the votes cast by Cigna
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`shareholders were voted in favor of the Merger. This Motion seeks: (a) a TRO to
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`prevent Cigna from wrongfully terminating the Merger Agreement or taking any
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`action to prevent or impede regulatory approval and consummation of the Merger,
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`as contemplated under the Merger Agreement and (b) to schedule an expedited trial
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`regarding Anthem’s: (i) declaratory judgment claim that it has extended the Merger
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`Agreement, (ii) declaratory judgment claim that Cigna’s purported notice of
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`termination is invalid, and (iii) claim for specific performance of the Merger
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`1 Unless otherwise indicated, all capitalized terms have the meaning ascribed in the
`Verified Complaint filed on February 14, 2017. All exhibits cited herein refer to
`the exhibits in the Verified Complaint.
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`Agreement. Absent a TRO, Cigna will destroy the enormous value of the
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`transformative Merger to Anthem and consumers, eliminate $13 billion in deal
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`premium to Cigna’s shareholders, and thwart Anthem’s appellate rights.
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`Under the Merger Agreement, the initial Termination Date was January 31,
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`2017. Given the time it could take to obtain regulatory approval or judicial
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`clearance, the Merger Agreement provided each party a right unilaterally to extend
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`the Termination Date through April 30, 2017 if all conditions to Closing had been
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`satisfied, or were capable of being satisfied at Closing, other than the required
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`regulatory and judicial approvals. On January 18, 2017, those conditions were
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`met, and Anthem delivered to Cigna a written notice extending the Termination
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`Date through April 30, 2017.
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`On February 8, 2017, the District Court issued an order enjoining the
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`Merger. The Merger Agreement requires the parties to appeal an adverse order,
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`and Anthem immediately filed its notice of appeal on February 9, 2017 and a
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`motion to expedite the appeal to the D.C. Circuit on February 13, 2017. Although
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`the Merger Agreement requires Cigna to appeal, Cigna instead sent a notice on
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`February 14, 2017 wrongfully purporting to terminate the Merger Agreement,
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`timed to prejudice Anthem’s motion to expedite the appeal.
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` Cigna’s termination is a nullity for two reasons. One, Anthem extended the
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`Merger Agreement through April 30, 2017. Notably, Cigna had previously
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`acknowledged that the Merger Agreement could, and would, be extended through
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`April 30, 2017 when the trial schedule was set in the DOJ Lawsuit. Indeed, the
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`District Court set the trial schedule based on an April 30, 2017 Termination Date,
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`and then stated in its just-issued decision that the “parties are bound by their
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`merger agreement through April 30, 2017.”
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`Two, Cigna has no right to terminate. The Merger Agreement provides that
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`no Party may terminate if it “has failed to perform fully its obligations under this
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`Agreement in any manner that shall have proximately caused or resulted in the
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`failure of the Merger to have been consummated by the Termination Date.” Cigna
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`has failed to perform fully its obligations under the Merger Agreement, and those
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`failures have proximately caused or resulted in the Merger not being consummated
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`by January 31, 2017.
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`Specifically, the Merger Agreement includes a very rigorous reasonable best
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`efforts covenant which includes a “hell or high water” requirement that the Parties
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`“tak[e] any and all actions necessary” to avoid antitrust impediments. Senior
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`management and board members at Cigna, instead, dedicated their efforts to
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`sabotaging the Merger in order to preserve their own employment positions and
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`capture a $1.85 billion break-up fee. Remarkably, Cigna worked to create a false
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`record that it was committed to the Merger and it was Anthem that failed to use
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`reasonable best efforts to obtain antitrust clearance and close the Merger, but the
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`record here is clear. The story starts with Anthem initiating the Merger and Cigna
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`resisting it. The story ends with Cigna wrongfully purporting to terminate the
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`Merger and Anthem suing to preserve it. And the same efforts by Anthem to close,
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`and by Cigna to avoid, the Merger fill the middle chapters, where Anthem incurred
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`over $520 million in advisor, attorney, consultant and bank commitment fees
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`working to clear the Merger:
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`Anthem
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`Cigna
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`Integration Efforts
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`Cigna refuses to allow meetings with its senior
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`management
`team, a necessary step
`to
`integration.
` Cigna also consistently delays
`producing data, preventing completion of an
`integration plan.
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`Cigna refuses to engage in the “Value Capture”
`work to identify synergies and efficiencies after
`March 2016 due to alleged “deal uncertainty.” By
`July, Cigna
`refuses
`to participate
`in any
`integration work at all, severely damaging the
`centerpiece defense for the Merger.
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`Anthem and McKinsey work to implement a key
`component of
`integration known as “Value
`Capture,” which was the process by which the
`synergies and efficiencies for the newly formed
`company would be identified and realized, the
`centerpiece defense for the Merger.
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`Anthem retains a team of 165 professionals at
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`McKinsey & Company to integrate the companies.
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`Anthem
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`Cigna
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`Advocacy Efforts To
`Discourage DOJ
`Challenge
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`Anthem prepares and submits 22 substantive
`“white papers” to the DOJ defending the Merger.
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`After January 2016, Cigna refuses to provide any
`substantive assistance to Anthem’s white paper
`efforts, and refuses to sign several of them.
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`Anthem contacts nearly 200 customers and
`brokers, explaining the substantial benefits of the
`Merger and encouraging them to contact the DOJ
`in support of the Merger. Anthem obtains 60
`customer declarations in support of the Merger
`plus 10 statements of support from customers
`and brokers.
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`Cigna fails to obtain any meaningful customer
`support, providing only two declarations. Cigna
`also prevents Anthem from seeking support from
`Cigna’s customers.
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`The DOJ expresses concern about the Merger’s
`effect in certain geographic areas, so Anthem
`identifies buyers with serious interest in acquiring
`Cigna assets to remediate the concern and allow
`the Merger to clear.
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`Cigna blocks remediation by refusing to sign
`customary non-disclosure agreements or provide
`the potential buyers with information to conduct
`necessary due diligence of the assets.
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`Mediation Efforts
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`The Court and Special Master suggest mediation
`numerous times. Anthem agrees to mediation
`and repeatedly asks Cigna to also agree to
`participate in mediation with the DOJ.
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`Cigna refuses to agree to mediation.
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`Anthem
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`Cigna
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`Pre-Trial Efforts
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`litigation, Anthem
`After the DOJ commences
`issues a press release stating that it “is fully
`committed to challenging the DOJ’s decision in
`court,” as required under the Agreement.
`
`
`Anthem files its answer on July 26, 2016, five
`days after DOJ filed the complaint, and asks
`Cigna
`to
`file an answer
`to help expedite
`discovery.
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`Cigna refuses to join Anthem’s press release and
`instead issues its own press release stating that it
`is “evaluating
`its options” and questioning
`whether the transaction “could close . . . at all.”
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`Cigna rejects Anthem’s request, and then does
`not file its answer for nearly two months.
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`Anthem takes the lead on over 100 depositions,
`prepares all of the substantive pleadings and
`briefs defending the Merger, and arranges the
`submission of non-party witness declarations and
`10 expert reports in support of the Merger.
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`Cigna refuses to provide any comments or
`suggestions on draft litigation materials, fails to
`offer comments on the DOJ’s expert reports, and
`fails to ask any questions in all but 3 of the over
`100 depositions in the case, and those questions
`were not supportive of the Merger.
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`Anthem asserts the common interest privilege to
`protect sensitive Merger-related documents from
`discovery.
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`Cigna sends letters to Anthem manufacturing a
`false record of breach, and then helps the DOJ
`obtain those letters and communications during
`discovery, including by disavowing the Merger
`parties’ common interest privilege.
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`Anthem prepares a pre-trial brief outlining facts
`and law in support of Merger and requests
`Cigna’s input.
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`Cigna refuses to comment on the pre-trial brief,
`refuses to sign the brief and refuses to offer any
`support for the Merger.
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`Anthem
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`Cigna
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`Trial Efforts
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`Anthem presents an opening statement for the
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`two phases of trial.
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`Anthem conducts direct examinations of 15
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`witnesses and cross-examines 21 DOJ witnesses.
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`Anthem makes closing arguments in both phases.
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`Anthem spends an average of sixteen to twenty
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`hours preparing each of its witnesses.
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`Anthem presents substantial testimonial and
`documentary evidence at trial to support the key
`defense that the Merger would create efficiencies
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`that would generate significant medical cost
`savings, the vast majority of which ultimately
`would be passed along to consumers.
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`
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`Anthem requests Cigna’s input on its proposed
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`findings of fact and conclusions of law.
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`Cigna asks for permission to object to Anthem’s
`questions, which
`the District Court
`finds
`“completely extraordinary.”
`
`Cigna does not cross a single DOJ witness
`objecting to the Merger, but remarkably crosses
`Anthem’s witnesses supporting the Merger.
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`Cigna makes no opening or closing statements in
`support of
`the Merger, but makes closing
`comments to undermine the Merger.
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`Cigna grants Anthem only one hour to help
`prepare key witnesses, including Cigna’s CEO,
`who Anthem is putting on at trial.
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`Cigna’s CEO provides testimony attacking the
`ability of the combined companies to achieve
`medical cost savings. The District Court finds that
`his testimony “inflicted significant damage on the
`synergies defense.”
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`Cigna not only refuses to comment on the
`proposed findings of fact and conclusions of law,
`but also refuses to sign these key documents, in
`effect opposing the factual and legal basis for the
`Merger.
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`Post-Trial Efforts
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`the
`to extend
`right
`its
`Anthem exercises
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`Termination Date to April 30, 2017 to allow
`sufficient
`time
`to obtain
`the necessary
`governmental approvals
`to consummate
`the
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`Merger through potential settlement or appeal.
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`Cigna refuses to acknowledge the extension and
`ignores Anthem’s requests for assurances that
`Cigna will help secure regulatory approval
`through potential settlement and appeal.
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`Anthem
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`Cigna
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`Appeal Efforts
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`Anthem files a notice of appeal, a motion to
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`expedite and an appeal brief.
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`Cigna refuses to agree to appeal the decision as
`required under the Merger Agreement.
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`Cigna severely damages the opportunity to obtain
`expedited
`appellate
`review by wrongfully
`purporting to terminate the Merger Agreement
`before the DOJ’s opposition to Anthem’s motion
`to expedite the appeal is due.
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`As the Wall Street Journal reported, “[d]uring trial proceedings that began in
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`November, Anthem mounted a legal defense of the merger single-handedly. Cigna
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`lawyers said very little during the proceedings, and when they did, it usually didn’t
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`help Anthem’s position.” (Compl. ¶ 12) Other media outlets reported that Cigna’s
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`“lack of enthusiasm about its $54 billion Merger with rival Anthem Inc. has given
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`the U.S. Department of Justice a leg up in an ongoing trial in D.C. federal court,”
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`and that merging partners are normally expected to be “cheerleaders for each
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`other,” but Cigna’s behavior was “extremely unusual” and “[t]o put it in certain
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`vernacular, if I were Anthem, I would be pissed out of my mind.” (Id.)
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`Cigna’s efforts to avoid the Merger were successful. On February 8, 2017,
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`the District Court issued an opinion (the “Opinion,” or “Op.”) enjoining the
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`Merger, citing as the “elephant in the courtroom” the fact that rather than
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`supporting the Merger, as required, Cigna was “actively warning” the District
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`Court against it: the DOJ “is not the only party raising questions about Anthem’s
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`characterization of the outcome of the merger: one of the two merging parties is
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`also actively warning against it.” (Op. at 9) In enjoining the Merger, the District
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`Court relied on “the doubt sown into the record by Cigna itself” and found that the
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`testimony of Cigna’s CEO “inflicted significant damage” on the key efficiencies
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`defense of the Merger. (Id. at 9, 119) As the media reported, “Cigna sabotaged its
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`own merger” and a “big part of the decision to block the case” was the fact that
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`“Cigna was actively fighting the merger.” (Compl. ¶ 13)
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`Notwithstanding Cigna’s efforts to avoid the Merger, Anthem believes that
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`the District Court’s ruling is erroneous. Additionally, Anthem believes that there
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`is a path forward involving outreach and potential settlement with the DOJ under
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`the new Administration because (i) there is a new Attorney General and there soon
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`will be a new Assistant Attorney General with responsibility for overseeing the
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`Antitrust Division, and (ii) a combined Anthem-Cigna in all 50 states will benefit
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`consumers in the form of lower medical costs and improved product offerings at a
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`time when the future of the Affordable Care Act is undetermined. So, there are
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`still very meaningful opportunities to consummate the Merger and deliver
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`enormous value to Anthem, Cigna, their respective shareholders, and consumers.
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`Anthem seeks a temporary restraining order preserving the status quo by
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`restraining Cigna from terminating the Merger Agreement and taking any action to
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` 9
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`prevent or impede regulatory approval and consummation of the Merger. Absent
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`such injunctive relief, Anthem will be irreparably harmed and neither money
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`damages nor any other remedy could compensate Anthem fully. One, Anthem
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`cannot consummate the Merger without Cigna’s compliance with its obligations
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`under the Merger Agreement because Anthem cannot obtain regulatory approvals,
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`settle with the DOJ or file a Certificate of Merger in Delaware on its own. The
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`loss of a unique and transformative $54 billion transaction constitutes irreparable
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`harm. Two, Cigna’s wrongful termination would substantially undermine, and
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`potentially thwart, Anthem’s appeal. The loss of appellate rights also constitutes
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`irreparable harm. Three, Cigna specifically stipulated to irreparable harm in the
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`Merger Agreement in “the event that any of the provisions in this Agreement were
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`not performed in accordance with their specific terms.” See infra at pgs. 33-38.
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`Following its wrongful termination, Cigna is not performing any of its obligations
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`under the Agreement.
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`Anthem’s claims are (more than) colorable because (i) Anthem extended the
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`Termination Date through April 30, 2017, and (ii) Cigna cannot terminate because
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`its failures to fully perform its obligations under the Merger Agreement caused the
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`Merger to not be consummated by January 31, 2017. See infra at pgs. 38-48.
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`Furthermore, the balancing of hardships weighs decisively in favor of a TRO.
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`Absent injunctive relief, Anthem will lose the benefits of the Merger and
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`potentially its appellate rights, Cigna’s shareholders will lose approximately $13
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`billion in deal premium value, and the numerous consumers who stand to benefit
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`from better and lower cost healthcare will be harmed. In contrast, the risk of harm
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`to Cigna from a TRO requiring it to comply with the Merger Agreement approved
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`by over 99% of its voting shareholders is nonexistent. See infra at pgs. 48-51.
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`FACTUAL BACKGROUND
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`A detailed recitation of the facts relevant to this Motion are set forth in the
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`Verified Complaint. The following highlights in more summary fashion certain of
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`these facts.
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`A. The Benefits Of Transformative Merger
`Anthem and Cigna have unique and complementary strengths, and the
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`combination of the two would be transformative in the healthcare industry,
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`offering a comprehensive range of health benefits products to a full range of
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`consumers, including individuals, employers, and state and federal governments.
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`(Compl. ¶ 21) Anthem would gain diversification and growth covering
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`approximately 55 million medical members with well-positioned commercial,
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`government, consumer, and specialty businesses, and a market-leading
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`international franchise and create a unique company that combines the best aspects
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`of Anthem’s and Cigna’s programs to their customers in the form of new and
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`improved products that combine Anthem’s discount advantage with Cigna’s
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`customer-facing product components that Cigna customers tend to find most
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`attractive. (Id. ¶ 22)
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`Cigna also benefits greatly from the Merger, as the consideration to be
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`provided to its shareholders is approximately $54.2 billion, a 38.4% premium to
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`Cigna’s unaffected stock price on May 28, 2015. (Id. ¶ 23) Termination of the
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`Merger Agreement would eliminate approximately $13 billion2 of value to Cigna
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`shareholders. Moreover, approximately 45% of the consideration to Cigna
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`shareholders is common stock of Anthem, so Cigna shareholders also would lose
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`the ability to participate in the upside of the combined company. (Id.)
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`The Merger would also benefit the public by creating $2.4 billion in medical
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`cost savings annually, the vast majority of which ultimately would be passed
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`through to consumers. (Id. ¶ 24) And the Merger would provide healthcare access
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`to a significant number of uninsured individuals by expanding the merged
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`company into new Affordable Care Act exchanges in nine states, where neither
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`Anthem nor Cigna currently offers individual coverages on-exchange. (Id. ¶ 25)
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`The combined company also would offer the prospect of expanded provider
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`collaboration, enhanced affordability and cost of care management capabilities,
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`and superior innovations. (Id.)
`
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`2 The precise amount varies based on Cigna’s stock price at a given time.
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`B. Despite The Obvious Benefits To Their Shareholders And
`Customers, Cigna’s Board And Senior Management Were
`Opposed To The Merger From The Outset
`
`
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`Notwithstanding their fiduciary obligations, Cigna’s board and senior
`
`management opposed Anthem’s merger proposal because of personal conflicts.
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`Specifically, Cigna’s board and senior management focused on entrenchment,
`
`rather than maximizing shareholder value, insisting on a guarantee that Cigna’s
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`CEO, David Cordani, be installed as CEO of the combined company and that
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`Cigna directors be allocated an equal number of seats as Anthem directors on the
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`board of the combined company. (Id. ¶ 27) Anthem rejected the personal
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`demands, and Cigna’s board and senior management would not move forward.
`
`(Id.)
`
`Blocked by Cigna’s board and senior management from pursuing a
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`transformative merger offering billions of dollars of deal premium value to Cigna’s
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`shareholders, Anthem publicly announced the terms of its offer. (Id. ¶ 32) Under
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`significant pressure from its shareholders, Cigna’s board and senior management
`
`then engaged with Anthem. The companies ultimately executed the Merger
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`Agreement on July 23, 2015. (Id. ¶ 33)
`
`C. Cigna Was Required To Use Its Reasonable
`Best Efforts To Obtain Regulatory Approval
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`The Merger Agreement includes a very robust reasonable best efforts
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`covenant regarding the Parties’ obligations and efforts that must be used to obtain
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`the required regulatory approvals. This covenant, Section 5.3 (the “Best Efforts
`
`Provision”), is more rigorous than a typical reasonable best efforts covenant
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`because it includes the “hell or high water” requirement that Cigna “tak[e] any and
`
`all actions necessary” to avoid antitrust impediments, which is limited only by a
`
`“material adverse effect on [the combined company]” exception that places an
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`extremely narrow (and practically nonexistent) limit on the Parties’ required
`
`obligations and efforts.
`
`Section 5.3(a) of the Merger Agreement provides:
`
`Subject to the terms and conditions of this Agreement (including
`Section 5.3(c)), each party will use its reasonable best efforts to
`prepare and file as promptly as practicable all documentation to effect
`all necessary applications, notices, petitions, filings, and other
`documents and to obtain as promptly as practicable all consents,
`waivers, licenses, orders, registrations, approvals, permits, and
`authorizations necessary or advisable to be obtained from any third
`party and/or any Governmental Entity in order to consummate the
`Mergers and the other transactions contemplated by this Agreement.
`Upon the terms and subject to the conditions hereof (including
`Section 5.3(c)), each party will use its reasonable best efforts to take,
`or cause to be taken, all actions, to do, or cause to be done, all
`things reasonably necessary to satisfy the conditions to Closing set
`forth herein and to consummate the Mergers and the other
`transactions contemplated by this Agreement.
`
`(Ex. A at §5.3(a)) (emphasis added)
`
`
`
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`Section 5.3(b) elaborates on Section 5.3(a) by including a “hell or high
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`water” covenant requiring the Parties to take any and all actions to avoid antitrust
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`impediments:
`
`Without limiting the foregoing, but subject to Section 5.3(c), the
`reasonable best efforts of Anthem and Cigna shall include Anthem
`and its Affiliates and Cigna and its Affiliates taking any and all
`actions necessary to avoid each and every impediment under the
`HSR Act, any Healthcare Law, antitrust law, insurance law or other
`applicable law that may be asserted by or on behalf of any
`Governmental Entity with respect to this Agreement, the Mergers
`and the other transactions contemplated hereby or that arises under
`or relates to any contracts between either Cigna or Anthem and any
`Governmental Entity, so as to enable the Closing to occur as promptly
`as practicable, including any of the following actions requested by or
`on behalf of any Governmental Entity, or necessary or appropriate
`to (I) obtain all Necessary Consents; (II) resolve any objections that
`may be asserted by or on behalf of a