Analyst Downplays Anthem, U.S. Settlement Speculation

Both Anthem  (ANTM) and the company it is seeking to acquire, Cigna  (CI) , rallied Friday after headlines from the courtroom suggested that the Department of Justice could be open to a settlement revolving its case to block the deal. An analyst at FBR Capital this morning weighed in, arguing that a potential deal between Anthem and the U.S. regarding the takeover of Cigna is unlikely.

OPEN TO SETTLEMENT: A U.S. federal judge decided that the trial over the merger will begin on November 21 and must conclude by December 30, Bloomberg reported on Friday. A lawyer for the Department of Justice said that the government is open to settlement talks, the news service added.

SETTLEMENT UNLIKELY: It's "VERY unlikely" that the government will agree to a settlement in the case, Chris Meekins, an analyst at FBR Capital wrote today in a note to investors. According to the analyst, "lawyers are always willing to" listen to settlement offers. He believes Friday's headlines "may have created confusion among investors about what actually occurred at the August 12 hearing." It would be newsworthy if the Department of Justice said it was not willing to "accept any settlement," Meekins wrote. Moreover, the government did not reach a settlement with Aetna  (AET) over its acquisition of Humana  (HUM) , even though the government was only objecting to the deal's impact on two markets, the analyst stated. By contrast, the Department of Justice's complaint against Anthem's deal involves four markets, Meekins noted. The analyst added that Anthem did not make a proposal that would meet the government's required "general structure" during its talks with the Department of Justice.

PRICE ACTION: In early trading today, Anthem lost 0.5% to $129.50, and Cigna fell 1% to $132. Anthem closed Friday up $1.99 to $130.19 while Cigna rose $6.69 to $133.31.

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