Bloomfield's Cigna Corp. will collect a $115 million "breakup'' fee from HealthSpring Inc. if their multi-billion-dollar health insurance merger fails to close in eight months, a regulatory filing shows.
The termination fee, triggered if the $3.8 billion deal fails to close by June 24 -- the eight-month anniversary of the deal's announcement on Monday, according to Cigna's 8-K filing Thursday with the Securities and Exchange Commission. Both parties say they expect the deal to be done in the first half of 2012.
Wall Street bank Morgan Stanley agreed to put up $2.5 billion for bridge financing to help finance the deal, the online filing shows.
Meantime, the filing also shows Cigna extracted non-compete pledges from HealthSpring Chairman and CEO Herbert A. Fritch and other unnamed senior executives of the Nashville company.
In the event they become Cigna employees, they won't engage in any moonlighting or sideline business ventures that compete directly with their new employer, the filing said.
In exchange for giving up his claims to severance payments that would have been triggered by the merger, Fritch will collect "retention benefits that include a combination of cash and equity awards, including performance-based awards,'' the filing states. It does not specify the amounts.
Also, Fritch has pledged to vote his 3.4 percent stake in HealthSpring's outstanding shares to support the $55-a-share merger, the filing shows.
The deal is subject to customary shareholder voting by both companies and must pass federal antitrust muster, the filing states.
The proposed merger with HealthSpring is seen as a potential boost to Cigna's Medicare Advantage business.
Medicare Advantage plans are privately run versions of the government's Medicare program. They are subsidized by the government and offer basic Medicare coverage topped with extras or premiums lower than standard Medicare rates.
HealthSpring has about 340,000 Medicare Advantage customers in 11 states, including Florida, New Jersey, Pennsylvania and Texas. It also has a Medicare prescription drug business with more than 800,000 customers.