Aetna, Humana abandon $37B merger blocked by judge

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(Bloomberg) — Aetna Inc. ended its $37 billion takeover of Humana Inc., after deciding not to appeal a ruling by a federal judge who blocked the health insurers’ combination on antitrust grounds.

The companies came to a mutual agreement to terminate the deal, and Aetna will pay Humana a $1 billion breakup fee, or about $630 million after taxes. A plan to divest some assets to Molina Healthcare Inc. — a remedy that was rejected by the judge —was also canceled, Aetna said in a statement Tuesday.

Aetna and Humana, which had agreed to combine in July 2015, are free to make new deals or spend billions of dollars on buying back their own shares. Another massive health insurance deal, meanwhile, is grinding forward —for now. Anthem Inc. said on Monday that it’s seeking a fast-track appeal of a different judge’s ruling that blocked its own proposed $48 billion acquisition of Cigna Corp.

The federal judge who blocked the Aetna-Humana deal on Jan. 23 sided with Justice Department lawyers who said that allowing the insurers to combine would harm competition, mainly in the market for Medicare Advantage plans.

“While we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,” Aetna CEO Mark Bertolini said in the statement. “Both companies need to move forward with their respective strategies.”

On Jan. 31, Aetna had given a forecast for this year’s profit that assumed the termination of the Humana and Molina deals. It projected earnings, excluding certain items, will climb at least 10% this year to $8.55 a share. Aetna said Tuesday that it will redeem $10.2 billion of debt tied to the deal at 101% of principal value.

Humana will provide its own 2017 outlook at 4:15 p.m. New York time, and then hold a conference call with investors.

Humana is “fully prepared to continue to go forward as an independent company,” Tom Noland, a company spokesman, said by e-mail.

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