The Cigna-Anthem merger and the MAE clause
The MAE (material adverse effect) clause is one of the first things arbitrageurs look at in a merger agreement. In the case of the merger deal between Cigna (CI) and Anthem (ANTM), the MAE clause lays out the circumstances under which either company can back out of the transaction.
Note that some companies refer to it as a material adverse change (or MAC) clause, but they’re more or less the same thing. In fact, arbitrageurs always call it the MAC clause regardless of how it’s actually characterized in the merger agreement.
The MAE clause, paraphrased
As a general rule, MAE clauses follow a similar format. Pretty much anything that has a material adverse effect on the company will be considered an MAE, but there are exceptions to that rule.
Please note that the MAE clause has been paraphrased here to limit the legalese. You should still read and understand the actual language in the merger agreement.
This is standard MAE language. The carve-outs follow in the next part of this series.
In this case, there’s a disproportionate effect clause. So if these carve-outs affect either company in a disproportionate way compared to other managed care companies, then it’s still an MAE.