CVS Deal For Aetna Reaches Endgame -- WSJ
December 01 2017 - 3:02AM
Dow Jones News
By Dana Mattioli and Anna Wilde Mathews
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 1, 2017).
CVS Health Corp. is moving closer to a deal to buy Aetna Inc.
for more than $66 billion in cash and stock. The deal, which could
be announced by Monday, would create a health-care behemoth selling
everything from drugs to insurance.
The companies are in advanced stages of negotiating a deal,
according to people familiar with the matter. It would likely be
valued at between $200 and $205 per Aetna share and consist mainly
of cash, some of the people said.
The cash-stock mix has yet to be finalized, and Aetna has been
pushing for more cash, they added.
It is still possible the timing could slip or that the companies
will fail to reach a deal.
Aetna shares edged up to $180.18 on Thursday. The stock was
trading at about $160 when The Wall Street Journal reported on the
possibility of a deal with CVS on Oct. 26; on that basis, a price
of over $200 a share would represent a premium of more than
25%.
It would be the biggest merger deal signed this year and the
largest since AT&T Inc. agreed to buy Time Warner Inc. for
about $85 billion in October 2016.
Shares of Woonsocket, R.I.-based CVS, which sank in the days
after news of the possible deal surfaced, have since recouped the
loss and then some. The stock rose 4.4% to $76.60 on Thursday,
putting the company's market value at about $77.6 billion.
CVS comprises a chain of nearly 10,000 drugstores and a big
pharmacy-benefits manager, or PBM, that selects which drugs are
covered for patients and negotiates discounts with drugmakers.
Aetna, based in Hartford, Conn., is a major health insurer. A
deal for the company, culminating months of talks, would lock in a
huge number of members for CVS's PBM as well as potential customers
for its drugstores. That could bolster its leverage in negotiations
with drugmakers.
The tie-up would also further efforts by CVS to move deeper into
health care and enable it to pitch a unified, seamless benefits
offering to clients such as big employers.
Moves that Amazon.com Inc. have made to potentially enter the
pharmacy business stoked CVS's interest in diversifying through a
deal with an insurer, people familiar with the matter have
said.
CVS has been wading ever deeper into health care, paring its
reliance on retail sales of cosmetics, grocery items and other
merchandise. Retail sales at CVS amounted to 46% of its total
revenue in 2016, down from 52% in 2013.
In buying Aetna, CVS would move more in the direction of
UnitedHealth Group Inc., the parent of both the biggest U.S. health
insurer and a health-services arm known as Optum, which includes a
PBM and a growing number of clinics and physician practices.
Aetna and CVS had already been partners, signing a contract in
2010 for CVS to provide pharmacy-benefit services to the
insurer.
A CVS-Aetna deal almost surely would attract close scrutiny from
U.S. antitrust enforcers who have expressed concern about
health-care consolidation.
The Justice Department in recent years has challenged
health-insurance mergers while the Federal Trade Commission has
objected to several hospital combinations.
The Justice Department's recent move to block the pending
AT&T-Time Warner deal has stirred investor concern about the
fate of a CVS-Aetna merger proposal. Indeed, the difference of $20
or more between the price per share that CVS is expected to pay and
where Aetna is currently trading is likely a sign that investors
are mindful of the possibility that an agreed deal between the
companies won't close.
A deal with CVS would mean a major change in direction for
Aetna, coming after the company's 2015 plan to buy rival insurer
Humana Inc. for $34 billion fell apart after a successful antitrust
challenge by the Justice Department. Though Aetna has said it
retains strong pathways to growth, including potential deals and
expansion of its Medicare and Medicaid businesses, none appears to
hold the potential that the company highlighted during its effort
to combine with Humana.
Sharon Terlep contributed to this article
Write to Dana Mattioli at dana.mattioli@wsj.com and Anna Wilde
Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
December 01, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
CVS Health (NYSE:CVS)
Historical Stock Chart
From Mar 2024 to Apr 2024
CVS Health (NYSE:CVS)
Historical Stock Chart
From Apr 2023 to Apr 2024