NEW YORK (The Deal) -- After being rebuffed by Cigna (CI), it is likely Anthem (ANTM) will have to approach shareholders in both companies to aid in moving its proposed combination along, according to a person familiar with the situation.
The fact Cigna's Sunday letter to Anthem gave minimal attention given to price means it is likely a corporate governance issue involved, primarily Cigna CEO David Cordani, who is resisting his proposed place in the management structure.
In a statement responding to Anthem's Saturday $54 billion overture, Bloomfield, Conn.-based Cigna cited as a point of contention the four roles Anthem's CEO Joseph Swedish would assume -- chairman of the board, CEO, president and head of integration. Cigna noted that the proposal so raises "serious questions regarding views on proper governance, board oversight and risk management and underestimates the complexity of combining our organizations."
This pushback came despite Cigna CEO David Cordani being in line to collect $130 million over the next two years from change-of-control provisions his company has in place. As part of the initial discussions, Cordani was already offered the position of president and chief operating officer as well as co-chairman of the integration team, according to Anthem's Saturday letter detailing its offer. Anthem, of Indianapolis, said the two companies had been in discussions since last August.
Peter Drippé, portfolio manager at Visium Asset Management, said in an interview Monday that he expected Cigna shareholders to respond positively to the proposal, as both companies had done well and, given the consolidation in the industry, "if Cigna were left out of the consolidation game, it would be at a competitive disadvantage."
The fund manager observed that on Anthem's Monday conference call, held to discuss the offer, the buyer seemed open to discussing some of the objections Cigna raised.
Both companies' stock was higher in afternoon trading--Anthem, up 3.63% while, Cigna was up 4.79%. As Drippé noted, "20% accretive is a compelling rationale.
In the Monday call, Anthem noted that the combination with Cigna was complementary. A slide explained that Anthem has a local focus, Medicaid franchise and leading Medicare supplement and Medicare advantage business while Cigna is strong in dental, vision, behavioral health, wellness and has a strong national account platform. Cigna is strong with employer groups whereas Anthem caters more to individuals.