Aetna will pay Humana $1 billion to walk away from its planned merger after a federal judge blocked the deal on Jan. 23
Under terms of the deal, Aetna agreed to the breakup fee before the U.S. Department of Justice sued to block the merger.
Both insurers said Tuesday they would not to pursue their $37 billion merger.
The decision follows a federal court order that sided with the DOJ’s argument that the deal would lessen competition in the Medicare and Medicare Advantage market.
Humana, which plans to hold a call with investors at 4:45 p.m. Tuesday, will get $630 million of the fee after taxes are taken out. The Louisville-based company also will delay its 2017 earnings projections.
“While we continue to believe that a combined company would create greater value for healthcare consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,” Aetna CEO Mark Bertolini said. “We are disappointed to take this course of action after 19 months of planning, but both companies need to move forward with their respective strategies in order to continue to meet member expectations. Our mutual respect for our companies’ capabilities has grown throughout this process, and we remain committed to a shared goal of helping drive the shift to a consumer-centric healthcare system.”
The decision also voids Aetna’s previously announced agreement to sell certain Medicare Advantage assets to Molina Healthcare. Aetna said it would pay the applicable fees associated with backing out of that deal.
In related news, Aetna is redeeming special mandatory redemption notes that were issued in June 2016. They will be redeemed at a special mandatory redemption price of 101 percent of the aggregate principal amount, plus any interest, Aetna said.
Payment will be made on or about March 16. Aetna said it will pay the fee by cashing in millions worth of senior notes.