Date
12 December 2017
CVS expects Aetna acquisition to yield cost synergies of US$750 million in the second year after the transaction closes. Photo: Reuters
CVS expects Aetna acquisition to yield cost synergies of US$750 million in the second year after the transaction closes. Photo: Reuters

CVS Health to buy Aetna for US$69 bln in year’s biggest deal

US drugstore chain operator CVS Health Corp has agreed to buy health insurer Aetna for US$69 billion in cash and stock, marking the year’s largest corporate acquisition deal.

According to an announcement Sunday, Aetna shareholders will receive US$207 per share — US$145 in cash and US$62 in stock, Reuters reports.

Under the stock payout, Aetna holders will get 0.8378 of a CVS share for each Aetna share they own. 

Aetna shareholders will own about 22 percent of the combined entity, while CVS shareholders will own the remainder.

The acquisition will combine one of the largest pharmacy benefits managers (PBMs) and pharmacy operators in the US with one of the nation’s oldest health insurers, Reuters noted.

Aetna’s national business ranges from employer healthcare to government plans.

The deal comes after Aetna’s US$37 billion plan to acquire smaller US health insurance peer Humana was blocked in January by a US federal judge over antitrust concerns. 

Aetna will be operated as a separate unit and Aetna’s existing leadership is expected to run the Aetna businesses, CVS chief executive Larry Merlo was quoted as saying.

Aetna will have two of its directors, in addition to Aetna CEO Mark Bertolini, join the board of CVS. 

The companies said that cost synergies in the second full year after the transaction closes — 2020 if the deal closes in the second half of 2018 as they expect — would amount to US$750 million. 

Their vision expands beyond capitalizing on CVS’ existing MinuteClinic structure, which largely offers preventative services like flu shots.

CVS plans to use its low-cost clinics to provide medical services to Aetna’s roughly 23 million medical members. In addition to health clinics and medical equipment, CVS could provide assistance with vision, hearing and nutrition.

A combined insurer and PBM will also likely be better placed to negotiate lower drug prices, and the arrangement could boost sales for CVS’s front-of-store retail business, Reuters noted.

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RC

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