Item 1.01 Entry into a Material Definitive Agreement
Agreement and Plan of Merger
On March 8, 2018,
Express Scripts Holding Company, a Delaware corporation (the
Company
), entered into an Agreement and Plan of Merger (the
Merger Agreement
) with Cigna Corporation, a Delaware corporation
(
Cigna
), Halfmoon Parent, Inc., a Delaware corporation and a direct wholly owned subsidiary of Cigna (
Holdco
), Halfmoon I, Inc., a Delaware corporation and a direct wholly owned subsidiary of Holdco
(
Merger Sub 1
) and Halfmoon II, Inc., a Delaware corporation and a direct wholly owned subsidiary of Holdco (
Merger Sub 2
and, together with Merger Sub 1, the
Merger Subs
).
The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Cigna will acquire the Company in a cash and stock
transaction through: (a) the merger of Merger Sub 1 with and into Cigna (the
Whitman Merger
), with Cigna as the surviving entity in the Whitman Merger and a direct wholly owned subsidiary of Holdco and (b) the merger of
Merger Sub 2 with and into the Company (the
Emerson Merger
and, together with the Whitman Merger, the
Merger
) with the Company as the surviving entity in the Emerson Merger and a direct wholly owned subsidiary
of Holdco. The Whitman Merger and Emerson Merger shall become effective concurrently (such time, the
Effective Time
). Upon the consummation of the Merger, Cigna and the Company will be direct wholly owned subsidiaries of Holdco.
Upon the terms and subject to the conditions of the Merger Agreement, which has been approved by the boards of directors of the Company and Cigna, at the
Effective Time, each issued and outstanding share of Company common stock, par value $0.01 per share (other than shares of the Company common stock (a) held by the Company as treasury shares, (b) owned by Cigna or by direct or indirect
wholly owned subsidiaries of the Company or Cigna (including Holdco and the Merger Subs) or (c) shares with respect to which appraisal rights are properly exercised and not withdrawn), will be converted automatically into (i) 0.2434 of a fully
paid and nonassessable share of Holdco common stock (the
Stock Consideration
and (ii) the right to receive $48.75 in cash, without interest (the
Cash Consideration
and, together with the Stock Consideration
and any cash in lieu of fractional shares of Holdco common stock, the
Merger Consideration
). No fractional shares of Holdco common stock will be issued in the Merger, and the Companys stockholders will receive cash in lieu
of any fractional shares of Holdco common stock.
Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each issued and
outstanding share of Cigna common stock, par value $0.25 per share (other than shares of Cigna common stock (a) held by Cigna as treasury shares or (b) by Holdco or Merger Sub 1) will be converted automatically into one fully paid and
nonassessable share of Holdco common stock.
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The Merger Agreement generally provides that Company stock options, restricted stock units
(
RSUs
) (other than those held by
non-employee
directors) and deferred stock units that are outstanding immediately prior to the Effective Time will be converted into equivalent Holdco
awards. Company performance share units that are outstanding immediately prior to the Effective Time generally will vest at the level of performance determined by the Compensation Committee of the Companys Board of Directors prior to
closing (provided that awards granted in 2018 will vest at the maximum level of performance) and will be cancelled at the Effective Time in exchange for the right to receive the Merger Consideration.
Company RSUs held by
non-employee
directors will be cancelled in exchange for a cash payment in an amount equal to the
Merger Consideration.
Cigna stock options, restricted shares, RSUs, strategic performance shares and deferred stock units that are outstanding
immediately prior to the Effective Time will be converted into equivalent Holdco awards.
Board of Directors of Holdco
Pursuant to the Merger Agreement, at the Effective Time, the board of directors of Holdco will consist of 13 directors, comprised of (a) eight independent
members of Cignas board of directors, (b) Cignas chief executive officer and (c) 4 independent members of the Companys board of directors. Within 30 days of the Merger Agreement, the Company will provide Cigna a list of the
board of directors willing to serve as members of the board of directors of Holdco, and within 30 days of the delivery of such list Cigna will select from such list the 4 members of the board of directors of the Company who will serve as members of
the board of directors of Holdco effective at the Effective Time.
Regulatory Efforts
Pursuant to the terms of the Merger Agreement, each of the Company and Cigna are required to use reasonable best efforts to take, or cause to be taken, all
actions necessary, proper or advisable under applicable laws to consummate the Merger and other contemplated transactions as soon as practicable. In furtherance thereof, Cigna has agreed to accept restrictions on its and the Companys assets to
the extent necessary to resolve such objections and eliminate every impediment that a governmental entity of competent jurisdiction asserts under any regulatory law, unless such restrictions would result in, or would be reasonably likely to result
in, individually or in the aggregate, a material adverse effect on the Company, Cigna and their respective subsidiaries, taken as a whole, after giving effect to the Merger, including the synergies expected to be realized from the Merger (a
Burdensome Condition
).
No Solicitation; Change of Recommendation
The Merger Agreement provides that, during the period from the date of the Merger Agreement until the Effective Time, each of the Company and Cigna will be
subject to certain restrictions on its ability to solicit alternative acquisition proposals from third parties, to provide
non-public
information to third parties and to engage in discussions with third
parties regarding alternative acquisition proposals, subject to customary exceptions. The Company has a right to terminate the Merger Agreement (a) if the board of directors of Cigna has changed its recommendation (or resolved to effect a
change in recommendation), or (b) in order to enter into an alternative acquisition agreement with respect to a Company Superior Proposal (as defined in the Merger Agreement). Cigna has reciprocal rights to terminate the Merger Agreement.
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Notwithstanding these restrictions, prior to receiving their respective stockholder approval, the board of
directors of the Company may, (i) in response to a Company Intervening Event (as defined in the Merger Agreement) or (ii) following receipt of a Company Superior Proposal, change its recommendation that the Company stockholders adopt the
Merger Agreement. The board of directors of Cigna has reciprocal rights to change its recommendation.
Conditions
Consummation of the Merger is subject to certain customary conditions, including approval by the holders of a majority of the outstanding shares of Company
common stock entitled to vote on the adoption of the Merger Agreement and approval by the holders of a majority of the outstanding shares of Cigna common stock entitled to vote on the adoption of the Merger Agreement, the shares of Holdco common
stock to be issued in the Merger having been approved for listing on the New York Stock Exchange, the receipt of certain necessary governmental and regulatory approvals without the imposition of a Burdensome Condition, the lack of pending litigation
instituted by certain governmental entities to enjoin, restrain or prohibit the Merger, and the receipt by each of the Company and Cigna of certain tax opinions. The obligation of each of the Company and Cigna to consummate the Merger is also
conditioned upon the other partys representations and warranties being true and correct (subject to certain materiality and Material Adverse Effect (as defined in the Merger Agreement) qualifications), the other party having performed in all
material respects its obligations under the Merger Agreement, in each case as set forth in the Merger Agreement. Consummation of the Merger is not subject to a financing condition.
Representations, Warranties and Covenants
The Company
and Cigna each made certain representations, warranties and covenants in the Merger Agreement, including, among other things, covenants by the Company and Cigna to conduct their businesses in the ordinary course during the period between the
execution of the Merger Agreement and consummation of the Merger.
Financing
Cigna entered into a commitment letter, dated as of March 8, 2018, with Morgan Stanley Senior Funding, Inc., and The Bank of Tokyo-Mitsubishi UFJ, Ltd.
(together, the Banks), pursuant to which the Banks have committed to provide, subject to the terms and conditions of the commitment letter, a $26.7 billion
364-day
senior unsecured bridge term
loan facility.
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Termination
The Merger Agreement provides for certain termination rights for both the Company and Cigna , including (a) the right of either party to terminate the
Merger Agreement if the Merger is not consummated by December 8, 2018 (subject to a
six-month
extension by either the Company or Cigna to June 8, 2019 if all closing conditions are satisfied other
than the absence of a legal restraint relating to a regulatory law or the receipt of the requisite regulatory approvals for the Merger) (such date, the Termination Date), (b) if the approval of Company or Cigna stockholders is not
obtained, (c) in order to enter into a binding agreement with respect to a superior proposal, (d) if a legal restraint from specific competent jurisdictions prohibiting consummation of the Merger has become final or
non-appealable
or (e) if the board of directors of the other party changes its recommendation that its stockholders adopt the Merger Agreement.
If the Merger Agreement is terminated (a) by Cigna because the Companys board of directors changed its recommendation prior to obtaining the
adoption of the Merger Agreement by the Companys stockholders, (b) by Cigna or the Company if the Companys board of directors changed its recommendation and Company stockholders voted against adopting the Merger Agreement or
(c) by the Company in order to enter into an alternative acquisition agreement with respect to a superior proposal that did not result from a breach of the Companys
non-solicitation
obligations,
then the Company must pay Cigna a fee equal to $1.6 billion (the
Company Termination Fee
). Further, if the Merger Agreement is terminated under certain circumstances and within 12 months after the date of such termination the
Company enters into an agreement regarding a sale of a majority of the Companys assets or equity or consummates such a sale, then the Company will be obligated to pay the Company Termination Fee concurrently with such entry or consummation.
Cigna has reciprocal obligations to pay a $1.6 billion termination fee to the Company.
Additionally, in the event that the Merger Agreement is
terminated by either the Company or Cigna if (i) a regulatory restraint preventing consummation of the Merger has become final or
non-appealable
or (ii) the Merger has not been consummated on or
prior to the Termination Date and at the time of such termination, the conditions to Cignas obligation to consummate the Merger have been satisfied other than those that relate to a regulatory restraint or a regulatory approval, Cigna may be
required to pay the Company a reverse termination fee of $2.1 billion.
The foregoing description of the Merger Agreement and the transactions
contemplated thereby is not complete and is subject to and qualified in its entirety by reference to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and the terms of which are incorporated herein by reference.
The representations, warranties and covenants of the Company and Cigna contained in the Merger Agreement (a) have been made only for purposes of the
Merger Agreement, (b) have been qualified by (i) the matters specifically disclosed in certain of the Companys and Cignas filings with the United States Securities and Exchange Commission and (ii) confidential disclosures
made in the disclosure schedules delivered in connection with the Merger Agreement, (c) are subject to materiality qualifications contained in the Merger Agreement which may differ from what may be viewed as material by investors, (d) were
made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement and (e) have been included in the Merger Agreement for the purpose
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of allocating risk between the contracting parties rather than establishing matters of fact. Accordingly, the Merger Agreement is included with this filing only to provide investors with
information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding the Company, Cigna or their respective affiliates or businesses, including Holdco and the Merger Subs. Investors
should not rely on the representations, warranties or covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Cigna or any of their respective affiliates, including Holdco and the Merger
Subs. Moreover, information concerning the subject matter of the representations, warranties or covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Companys,
Cignas or Holdcos public disclosures.