Aetna, Coventry to Tweak Agreement to Resolve Some Lawsuits

   By Jon Kamp 
 

Aetna Inc. (AET) and Coventry Health Care Inc. (CVH) have agreed to resolve some shareholder lawsuits over the health insurers' planned consolidation by lowering the break-up fee and discussion time Coventry would owe Aetna if a better offer comes along.

Aetna announced plans in August to buy Coventry in a cash-and-stock deal that was valued at $5.7 billion at the time. The deal will bolster Aetna's presence in government-financed health care while solidifying the Hartford-based insurer's position as the third-largest managed-care firm by membership, behind UnitedHealth Group Inc. (UNH) and WellPoint Inc. (WLP).

As Aetna and Coventry noted in regulatory filings Tuesday, their deal sparked "several putative shareholder class action complaints" in Maryland and Delaware. The suits included allegations that the merger agreement was unfair to Coventry shareholders, among other issues.

Aetna and Coventry said parties have agreed to resolve consolidated cases in Delaware. The agreement doesn't cover cases in Maryland, where the Circuit Court for Montgomery County granted the companies a 90-day stay last week.

Through the Delaware case, the companies agreed that Coventry will owe Aetna $100 million, rather than $167.5 million as previously planned, if the deal agreement is terminated under certain circumstances. Additionally, Coventry will have to "discuss and negotiate in good faith with Aetna" for two days--rather than five--before Coventry's board can change its recommendation after getting a superior deal proposal.

Aetna and Coventry said they "have denied and continue to deny any wrongdoing or liability" involving the lawsuits, but have agreed to these changes to eliminate burdens associated with further litigation.

The companies agreed to resolve the consolidated Delaware cases through a memorandum of understanding. That memorandum calls for a settlement agreement the parties will submit to the Delaware Court of Chancery for review and approval.

Aetna and Coventry also agreed to add some details to background material about the companies and their negotiations. One disclosure said Coventry Chief Executive Allen F. Wise told the board on "multiple occasions" between 2009 and Jan. 31 this year that he wanted to retire. But the CEO agreed to stay on until a successor was identified.

The companies expect the deal to close in mid-2013, pending approval. They said last week that the U.S. Department of Justice extended its antitrust review by requesting more information, but this didn't change the planned closing timeline.

Elsewhere in the industry, WellPoint and Amerigroup Corp. (AGP) recently resolved a shareholder lawsuit by lowering the break-up fee Amerigroup would owe if it terminated a planned $4.46 billion acquisition by WellPoint. Also, Amerigroup agreed to state it was prepared to receive and consider any inquiries and superior proposals. Those companies also denied any wrongdoing.

WellPoint said last week that the deal remains on track to close by year-end.

Write to Jon Kamp at [e-mail]

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