Courtesy of Wikimedia Commons.
“The Code of Honor — A Duel in the Bois De Boulogne, Near Paris” by Godefroy Durand | Courtesy of Wikimedia Commons

Let the duel begin.

Federal regulators threw down the gauntlet last week to indicate they’re intent on fighting Aetna’s proposed acquisition of rival insurer Humana. But the companies didn’t blink, picked up the gauntlet and announced they would “vigorously defend” the deal.

A former high-level antitrust attorney told Insider Louisville that both parties are now retreating into their camps to collect more evidence, to review more data and to fine-tune their strategy — though a battle may yet be averted.

Aetna, based in Hartford, Conn., wants to buy Louisville-based rival Humana for $37 billion. The companies have received approval from shareholders and most of the states in which they do business. However, federal antitrust regulators filed suit last week to stop the deal, saying it would reduce competition and harm consumers, especially seniors.

Company officials have said the merged company would offer better and more innovative health care at a lower cost.

Ethan Glass
Ethan Glass

Ethan Glass, former DoJ assistant chief, said that the action taken by the feds last week leaves three primary outcomes:

  • Aetna and Humana could sell portions of their business that address the regulators’ concerns, and the parties could reach a settlement. That would prompt the DoJ to drop the suit.
  • Aetna and Humana could terminate their plans to merge. The companies might be inclined to do so if they believe they cannot win the case in court or if they believe that any offer that might satisfy the regulators would negate any benefit they would derive from the merger.
  • The case goes to trial, both parties present evidence, and a judge decides.

As we reported Monday morning, the feds and the companies differ materially on what needs to happen for the merger to be completed, which makes a settlement an unlikely option at this point. DoJ officials said they had seen “absolutely nothing” to suggest that the companies might make a divestiture offer that could satisfy the regulators’ concerns.

Glass, who now works for Washington, D.C.-based law firm Quinn Emanuel, said it is difficult to determine how or how quickly the case will be resolved. The companies could walk away from the deal today or they could reach an agreement with the DoJ next week. Litigation would take the longest, but how quickly the case goes to court or how long a trial would take depends on a complex set of issues.

Humana acknowledged in an SEC filing last week it is no longer confident the deal will be closed this year because of the uncertainty surrounding the potential litigation. Aetna and Humana previously had said they expected their marriage to be consummated in the second half of this year.

Even during the trial, settlement and termination remain on the table: In December, General Electric announced it had terminated its agreement to sell its Louisville-based appliance division to Sweden-based AB Electrolux as the antitrust trial to stop the acquisition was about to go into its fifth week. Glass served as chief litigator in the case.

Seal_of_the_United_States_Department_of_Justice.svgGlass said that throughout the process, both sides will continue to analyze data, collect evidence and refine their argument to bolster their case and undermine the opposition’s.

“There’s a continuous risk assessment that is impacting each side’s appetite for continuing,” he told IL.

Both sides will weigh whether giving up more than they like is superior to not getting anything. The companies will look at making more divestitures than they’ve offered — but not so much that the deal no longer makes sense. The DoJ, meanwhile, will weigh whether it wants to accept the company’s divestitures, even if they reduce competition a little bit — in return for not having to take the risk that a judge allows the merger to proceed unrestrained.

Millions of documents and terabytes of data are continually being analyzed, Glass said, and any new pieces of information, or the company’s stock price or a judge’s comments can affect how the parties view their chances.

“It’s really a dynamic process,” Glass said.

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Boris Ladwig
Boris Ladwig is a reporter with more than 20 years of experience and has won awards from multiple journalism organizations in Indiana and Kentucky for feature series, news, First Amendment/community affairs, nondeadline news, criminal justice, business and investigative reporting. As part of The (Columbus, Indiana) Republic’s staff, he also won the Kent Cooper award, the top honor given by the Associated Press Managing Editors for the best overall news writing in the state. A graduate of Indiana State University, he is a soccer aficionado (Borussia Dortmund and 1. FC Köln), singer and travel enthusiast who has visited countries on five continents. He speaks fluent German, rudimentary French and bits of Spanish, Italian, Khmer and Mandarin.