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Aetna gives up on $34B Humana deal, will pay $1B breakup fee

February 14, 2017

Aetna Inc. ended its $34 billion takeover of Humana Inc., after deciding not to appeal a ruling by a federal judge who blocked the deal on antitrust grounds.

The health insurers came to a mutual agreement to terminate their merger, Connecticut-based Aetna said in a statement on Tuesday. Aetna will pay Louisville-based Humana a $1 billion breakup fee.

The companies are now free to make new deals or buy back billions of dollars of their own shares. Aetna agreed to acquire Humana in July 2015, and the U.S. sued to block the takeover about a year later.

A federal judge blocked the deal on Jan. 23, siding with Justice Department lawyers who said that allowing the insurers to combine would harm competition, mainly in the market for Medicare Advantage plans. Aetna and Humana had agreed to divest some assets to Molina Healthcare Inc., but the judge rejected that remedy. That deal was also canceled on Tuesday.

Their deadline to complete the deal or agree to extend it while they appealed was Feb. 15.

Aetna said in late January that it expects earnings, excluding certain items, to climb at least 10 percent this year to $8.55 a share, even if it can’t complete the Humana deal. Humana said last week that it would give its outlook for this year by Feb. 16.

Another massive health insurance deal, meanwhile, is grinding forward—for now. Indianapolis-based Anthem Inc. on Monday said that it’s seeking a fast-track appeal of a different judge’s ruling blocking its proposed $48 billion acquisition of Cigna Corp. The company is seeking a ruling before an April 30 merger deadline.

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