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 jon.kamp@dowjones.com
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