Monday, December 04, 2017 1:00 am
CVS announces $69 billion deal for Aetna
Aims to expand in-store clinics, health services
TOM MURPHY and DAVID KOENIG | Associated Press
CVS Health wants to do much more than fill your prescription or jab your arm with an annual flu shot.
The drugstore chain is buying the nation's third-largest health insurer in order to push much deeper into customer care. The evolution won't happen overnight, but in time, shoppers may find more clinics in CVS stores and more health care they can receive through the network of nearly 10,000 locations that the company has built.
The $69 billion deal announced Sunday evening will push the drugstore chain more forcefully in a direction it has been heading for years, according to analysts on Wall Street. It already has about 1,100 clinics in its store network, and it has methodically expanded what they do. The clinics started off as a place to treat basic health care needs like sinus infections or strep throat.
Gradually, the company has added services like blood draws or monitoring of chronic conditions such as high blood pressure and diabetes. Expect that trend to continue, as the drugstore switches more from selling products in its stores to services that can't be bought online, where retailers face formidable competition from the likes of Amazon.
“I think over time you're going to see less of that front-store retail and more health care services in their stores,” said Jeff Jonas, a portfolio manager for Gabelli Funds who follows drugstores.
The mammoth acquisition pairs a company that runs more than 9,700 drugstores and 1,100 walk-in clinics with an insurer covering around 22 million people. CVS Health Corp. is also one of the nation's biggest pharmacy benefit managers, processing more than a billion prescriptions a year for insurance companies, including Aetna.
Analysts say the combined company could add more clinics and expand in-store services to include eye care or maybe centers for hearing aids. That could gradually turn CVS Health a one-stop-shop for health care, a place where patients can get a hearing aid checked, then see a nurse practitioner and pick up prescriptions. “If you think about it, we actually don't have anything like that,” Jefferies analyst Brian Tanquilut said.
CVS also is on the defensive with this deal. Locking up Aetna helps secure a large client that can send millions of customers to its stores. It also keeps Aetna from turning to Amazon, if the retail giant decides to expand into prescription drugs.
CVS Health Corp. will pay about $207 in cash and stock for each share of Aetna Inc., a person with knowledge of the matter said Sunday. That represents a 29 percent premium to the price of Aetna shares on Oct. 25, the day before The Wall Street Journal first reported about the possibility of a deal.
The source said the boards of both companies have approved the deal. But antitrust regulators still need to approve the deal, and that is not guarantee.
The Justice Department said last month that it is suing AT&T to stop its $85 billion purchase of Time Warner. Regulators also sued to stop Aetna's approximately $34 billion purchase of rival Humana Inc.