Aetna and its rival Humana have terminated their agreement to merge, after the deal worth $34 billion was blocked in federal court due to antitrust problems. Aetna now must play Humana a break-up fee of $1 billion, which was part of the merger agreement.
The CEO and chairman of Aetna Mark Bertolini said that even though the two companies believe a merger would create more value for consumers in the healthcare care field, the environment at this time makes it far too challenging to continue the pursuit of the transaction.
The merger agreement was reached over 19 months ago, but the two companies will now move ahead with their own strategies.
Humana said its termination fee would be $630 million after taxes were taken out. The company announced that it would release its financial guidance for 2017 after Wall Street closes on Tuesday.
It was in January that Robert Bates a United States District judge blocked this merger. He said that the merger of the two giants in healthcare would lower the competition available in the market of Medicare Advantage for seniors.
Humana and Aetna had reached an agreement that would divest a certain amount of their business of Medicare Advantage in markets that were overlapping. The business was to be sold to Molina Healthcare.
That was done to address the different concerns that regulators might have about the amount of competition in that segment of healthcare.
However, District Judge Bates said that the proposed sales were inadequate due to Molina not having a sufficient enough track record when it came to Medicare.
Aetna announced that it would also end its deal signed with Molina. The insurer said it would also play any applicable fees that are associated with it ending its deal with Molina.
The company announced as well that it would redeem over $10 billion of its Specialty Mandatory Redemption Notes as of or close to March 16, which were related to the deal with a principal value of 101%.
Aetna, on January 31, released its forecast for profit in 2017 that had assumed the deals with Humana as well as Molina would be terminated.
In its forecast it stated that projected earnings, eliminating certain items, would climb by a minimum of 10% during 2017 to reach $8.55 a share.