Anthem Inc.’s nearly two-year effort to buy rival insurerCigna Corp. is officially dead.

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Anthem said Friday that it won’t appeal aDelaware judge’s ruling late Thursday that Cigna can walk away fromthe $48 billion health insurance merger. That leaves thecompanies to fight over who’s to blame for the deal’s collapse.

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“The only surprise here is that it took so long to reach anending that the market had long anticipated,” said Michael Newshel,an analyst with Evercore ISI.

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The judge’s decision means Anthem could be on the hook for a$1.85 billion breakup fee to Cigna, which said Friday it will seek“ prompt payment.” The insurer has argued that Anthem was toostubborn to see that the concerns about competition wereinsurmountable, and also wants $13 billion in damages. MeanwhileAnthem, which has countersued, said that it will seek damages, too,and that its former merger partner isn’t entitled to a terminationfee.

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“The reality is both parties probably have some risk and they’llbargain for something between zero and $1.85 billion,” said MattCantor, an antitrust lawyer at Constantine Cannon.

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Anthem fell 0.7 percent to $181.44 at the close in New York.Cigna lost 1.1 percent to $162.03.

‘Massive damages’

In his ruling, Delaware Chancery Judge Travis Laster said Anthemdidn’t deserve a 60-day extension of an earlier order barringCigna’s exit because it was “incredibly unlikely” that the companycould close the deal. However, the judge said there was significantevidence Cigna may have violated the merger agreement by draggingits feet on antitrust concerns, which could entitle Anthem to“potentially massive damages.”

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“Cigna’s repeated willful breaches of the merger agreement andits successful sabotage of the transaction has caused Anthem tosuffer massive damages,” Anthem said Friday.

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In its own statement a few hours later, Bloomfield,Connecticut-based Cigna used similar language, stating that “itbelieves that Anthem willfully breached those obligations and as aresult the transaction did not receive the requisite regulatoryapprovals.”

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The takeover had been blocked this year by a federal judge onantitrust grounds. Anthem has asked the U.S. Supreme Court tooverturn a ruling finding the deal flawed, though the court isunlikely to weigh in now that Cigna has been allowed to walk.

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The demise frees both Anthem and Cigna to acquire other firms,and it lets Cigna once again determine its own fate.

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“That’s the next big question,” said Ana Gupte, an analystat Leerink Partners. “I think they’ll end up being moreacquisitive.”

What’s next

Cigna Chief Executive Officer David Cordani has estimated thatCigna would have $7 billion to $14 billion of deployable capital bythe middle of this year. The high end of that range includes extradebt the company could take on if it decided to make acquisitions,Cordani has said. The company said on Friday it would repurchase atleast $1.6 billion in stock by the end of the year.

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Anthem, based in Indianapolis, has also said it would pursuedeals and buybacks as its “Plan B” if the Cigna transaction didn’tgo through. Anthem CEO Joseph Swedish has said he might attempt touse deals to expand in Medicare Advantage, the lucrative businessof selling private health plans for the elderly.

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There are a plethora of other partners for either company. Atakeover of Humana Inc. by Aetna Inc. was also blocked this year onantitrust grounds. Humana, which has a market value of about $33billion, specializes in Medicare Advantage.

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Molina Healthcare Inc., which specializes in the Medicaid healthprogram for low-income individuals, could also be in play, said LesFuntleyder, a health-care investor at E Squared Asset Management.The company’s board ousted the CEO and CFO brothers who long ledthe firm their father founded.

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At the same time, insurers may pause as they wait and see whatlawmakers in Washington do with the Affordable Care Act.Republicans are working to gut the law and rewrite insurancerules.

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“Everybody will catch their breath, and maybe we’ll revisit someM&A in ’18 or ’19 as the rules of the road start to become moreclear,” Funtleyder said. “I would be surprised if anybody didanything there for a while.”

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The cases are Anthem Inc. v. Cigna Corp., 2017-114; and CignaCorp. v. Anthem Inc., 2017-0109, Delaware Chancery Court(Wilmington).

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