CVS Healthiness will acquire Aetna for roughly $69 billion in cash and set in a first-of-its kind deal aimed at fending off challenges in retail and strength care, the companies announced on Sunday.
The landmark agreement is one of the year’s kindest so far. It comes as insurers are under pressure to lower medical costs, and retailers are tipsy attack from new competitors, including an increasingly powerful Amazon. It makes the first health care triple threat, combining CVS’s pharmacy and apothecary benefit manager (PBM) platform with Aetna’s insurance business.
According to the acquiesce in terms, Aetna stockholders will receive $207 per share, $145 in moolah and $62 in stock. Including debt, the deal is valued at $78 billion.
Upon the guarded of the transaction, three of Aetna’s directors, including Chairman and CEO Mark Bertolini, discretion join the CVS board of directors. Aetna will operate as a stand-alone concern unit within the larger company, led by members of the insurer’s current executives team.
The transaction is expected to close in the second half of 2018, conditional on to regulatory and shareholder approval.
“This combination brings together the expertness of two great companies to remake the consumer health care experience,” CVS President and CEO Larry Merlo said in a announcement.
“With the analytics of Aetna and CVS Health’s human touch, we will generate a health care platform built around individuals.”
The takeover be involved a arises as Amazon threatens to enter the drug industry. The retail juggernaut has put preliminary talks with makers of generic drugs about its unrealized entry into the pharmacy space, according to people familiar with the debates.
With Amazon as a pharmacy competitor, CVS risks losing the key draw to its funds. Shoppers can already find CVS’s cosmetic and household staples in other retailers and online, much for cheaper.
CVS, which has a network of nearly 10,000 pharmacies and over 1,000 walk-in clinics, envisions to use its vast retail footprint as a center for pharmacy, nutrition, clinical, delusion and even beauty services. They will still sell conventional household goods.
The two will thus create a new touch point external the costly hospital emergency room visits that insurance fellowships must pay for. They will add new reason to visit CVS stores.
By tying up with Aetna, CVS bonds the move into health care it has been making since its property of the Caremark PBM business in 2007. (A PBM typically is a third party that orchestrates prescription drug benefits for a commercial health plan.)
The acquisition give grounds CVS more scale to bargain for better prices for the prescription drugs it deal ins through its PBM business. It also fortifies Aetna’s insurance business by spawning the ability to offer its customers cheaper co-payments, presumably only in CVS caches.
It would also provide a tighter hold on patients who require assorted expensive, specialty drugs — the more profitable part of the business.
“These elevated complex-care cost members, the very, very sick, or the ones that are profiting expensive drugs, tend to be the highest profit for the industry,” said Pramod John, CEO of Vivio Constitution, a specialty pharmacy management firm.
For Aetna, the deal marks a mutate in strategy after its attempted tie-up with Humana was blocked by a federal court on antitrust grounds. The two, as if others in the insurance industry, had sought out scale to better negotiate gets with hospitals and PBMs.
A CVS deal would be a so-called vertical integration — an gain along a company’s supply chain — rather than a horizontal acquirement of a direct competitor. Such deals are thought to be less threatening to antitrust testimonies.
Still, AT&T, which is making the largest recent attempt at vertical integration with its introduced $85 billion acquisition of Time Warner, has been sued by the Subdivision of Justice to stop the deal.
Barclays and Goldman Sachs served as pecuniary advisors to CVS and Centerview Partners provided financial advice to the CVS board. CVS was advised on legit matters by Shearman & Sterling, Dechert, and McDermott Will & Emery.
Lazard and Allen & Public limited company served as financial advisors to Aetna. Evercore served as financial advisor to Aetna’s lodge. Davis Polk & Wardwell acted as Aetna’s legal advisor.