By Brent Kendall and Anna Wilde Mathews
WASHINGTON -- Newly unsealed court testimony shows health insurers Anthem Inc. and Cigna Corp. have significant disagreements about their proposed merger, offering new details of a rift that is highly unusual for two companies seeking to press ahead with such a deal.
A trial on the proposed merger began last week after the Justice Department decided to challenge it on antitrust grounds. Substantial parts of the case have been open to the public, but U.S. District Judge Amy Berman Jackson closed the courtroom for crucial portions of testimony by AnthemChief Executive Joseph R. Swedish and Cigna CEO David Cordani, after the companies said the sessions could expose confidential business information.
On Monday, the judge ordered the transcripts of the testimony of the testimony unsealed after seven media organizations including The Wall Street Journal raised objections to keeping it sealed.
Anthem and Cigna have quarreled for months behind the scenes even as their push to combine has moved forward, with each company accusing the other of violating their $48 billion agreement. The Wall Street Journal first reported on the clashes in a front-page story in May.
The newly unsealed testimony showed that, among other things, Cigna officials have questioned Anthem's plans for their company postmerger, while Anthem executives have tried to move forward unilaterally after Cigna ceased cooperating with them on various deal-related issues
In testimony from last Tuesday, reviewed byThe Wall Street Journal, Mr. Swedish said Anthem had set up a highly confidential team to work on merger integration without Cigna even's knowledge.
The situation appeared to puzzle the judge. "How do you work on integration without talking to the person you're integrating with?" she asked.
Mr. Swedish responded that the team was established only after Cigna quit taking part in certain integration efforts on the advice of its lawyers.
The Justice Department, in its questioning of Mr. Swedish, cited several internal documents from the companies. In one from December 2015, Mr. Swedish sent Mr. Cordani a note saying the two companies' execution of their integration plans had been "unacceptable."
Another internal Anthem document from this year said progress on merger integration planning was "severely constrained due to Cigna's lack of engagement."
Mr. Swedish's testimony also revealed significant tensions between thetwo sides about Mr. Cordani's duties in a postmerger company. The testimony confirmed that Cigna's board pushed back after Mr. Swedish offered Mr. Cordani authority that fell short of overseeing all of the combined company's major business units. Mr. Swedish relented and expanded the planned oversight to include all three units. But Mr. Swedish said he wasn't sure if Mr. Cordani would stay with the new company at all, noting the Cigna leader had "never directly said to me that he's coming to the company."
Mr. Cordani, in his own previously sealed testimony, confirmed that Cigna stopped working on merger integration in the summer. He also said that Cigna is concerned that Anthem's mergerplans would weaken Cigna's network and value.
"It will erode it pretty rapidly," Mr. Cordani said
Some of Mr. Cordani's testimony appeared to cut against Anthem's defense of the deal. He said the integration strategy favored by Anthem, not supported by Cigna, could hurt competition by eroding Cigna's offerings -- an argument being posed by the Justice Department.
In fact, he said, Cigna disagreed with an ad run by Anthem that touted the merger's competitive benefits, because Cigna believed "choice would potentially be constricted" for insurance clients under Anthem's preferred setup.
If the merger doesn't go through, Cigna could receive a $1.85 billion breakup fee from Anthem.
The Justice Department has sought to make the companies' discord an issue in the case, saying the tension would impede any benefits from the merger. But Mr. Swedish in his testimony said the disagreements wouldn't deter Anthem from moving forward if the court approves the deal.
"I want to underscore all this stuff about conflict or whatever you want to call it -- to me, it's noise that doesn't relate to the state of readiness we now have and our ability to move forward," he said.
Cigna declined to comment. An Anthem spokeswoman declined to comment beyond Mr. Swedish's remarks. The company is expected to begin presenting its defense of the merger in court Tuesday.
Anthem says the deal will make it more innovative and efficient, producing cost savings that will benefit consumers. It also argues that even after the transaction it won't have anticompetitive muscle to impose price increases on customers.
Write to Brent Kendall at email@example.com and Anna Wilde Mathews at firstname.lastname@example.org
(END) Dow Jones Newswires
November 28, 2016 19:16 ET (00:16 GMT)
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