CVS Health agrees to acquire Aetna in $69 billion deal
Sheetal Sukhija - Monday 4th December, 2017
CVS Health will create a new giant in the prescription drugs industry
The deal is likely to spark further consolidation in the sector
The combination of the companies will shake up the drugs business
CALIFORNIA, U.S. - In a fresh deal, America’s biggest drugstore chain CVS Health is said to have agreed to acquire the healthcare insurer Aetna.
The agreement is part of a $69 billion deal and is set to create a new giant in the prescription drugs industry and is likely to spark further consolidation in the sector.
The move is seen to head off Amazon’s entry into pharmacy business and is likely to spark further consolidation in the sector.
Under the terms of the agreement shareholders of Aetna, the third-largest health insurer in the U.S. by sales, will receive $207 per share, comprising $145 in cash and $62 in CVS stock.
This includes the assumption of Aetna's net debt, the total value of the deal is $77 billion.
Further, analysts believe that the combination is set to shake up the U.S. prescription drugs business.
Reports noted that the offer will see Aetna shareholders own about 22 percent of the combined company.
It represents a nearly 30 percent premium to Aetna’s share price in late October.
Last year, Aetna was forced to drop its $37 billion takeover agreement with rival Humana after being blocked by regulators, who said the deal would hurt competition and consumers.
The Department of Justice also blocked the $54 billion merger between Anthem and Cigna for similar reasons.
Analysts believe that the CVS-Aetna combination would give the newly formed company better leverage in striking deals with drugmakers.
In addition to its nearly 10,000 pharmacy stores, CVS operates a pharmacy benefits management business (PBM) that negotiates prices for medicines with big pharma groups.
Ricky Goldwaser, analyst at Morgan Stanley said that the deal would “diversify CVS profit streams ahead of an Amazon entry and set the stage for a new healthcare-retail delivery model.”
The companies have stated that the deal is expected to generate up to mid-single-digit revenue accretion by late 2019, including the ability to deliver $750 million in near-term synergies.
In a statement, Larry Merlo, CVS Health president and chief executive, said the goal of the deal was to remake the consumer health care experience in the U.S. by bringing various strands of the industry under one roof.
He added that the combined company aimed to become “America's front door to quality health care, integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers.”
While Merlo will keep his current role in the combined company, Mark Bertolini will remain chief executive of Aetna, which will operate as a stand-alone unit within CVS.
After the transaction closes, three of Aetna's directors, including Bertolini, will be added to the CVS Health Board.
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