CVS Health Agrees to Acquire Aetna for $69 Billion

American retail pharmacy CVS Health has agreed to acquire the insurance company, Aetna Inc., in a deal that could create a new giant in the health care industry.

CVS stated that it would buy the Connecticut-based health care insurer through a $69 billion or $207 per share cash and stock agreement.

This deal also marks as one of the largest acquisitions made in the history of healthcare. It is expected to close in the second half of 2018.

Under the terms of the agreement, Aetna’s shareholders will receive $145 per share in cash and 0.8378 CVS shares for each of the insurer’s share.   

Aetna will also have about 22 percent of the merged company, while the Rhode Island-based pharmacy will own approximately 78 percent.  

The merger is seen as a defensive tactic against the online retail giant Amazon.com Inc. as it is believed to be looking into entering the pharmacy business.

In the past few months, Amazon has received wholesale licenses with the US state pharmacy boards, triggering speculations that the e-commerce company could start selling prescription medicines through its online platform.   

Analysts said that the agreement could push other healthcare sector to have their own mega-merger as rivals strive to follow the strategy.   

CVS-Aetna Merger Could Shake-Up the US Healthcare Business

If the transaction goes through, CVS and Aetna would be able to establish a combined entity that sells everything from prescription drugs to insurance.  

CVS’ chief executive Larry Merlo said that the merged company aims to become America’s front door to quality healthcare, combining the work of doctors, pharmacists, other healthcare professionals, and health benefits groups to create a platform that is easier to use and less expensive for consumers.  

Merlo will remain as CEO in the combined business, while Mark Bertolini will keep his current role as Aetna’s chief executive. The healthcare insurer will operate as a separate unit within CVS as well.

Both companies stated that the deal fills an unmet need in the current health care system and presents a special opportunity to redefine access to high-quality care in lower cost and local settings.

The retail pharmacy giant plans to use its low-cost clinics to offer medical services to Aetna’s nearly 23 million medical members. Besides its health clinics and medical equipments, CVS could also provide help with vision, hearing, as well as nutrition.

A combined pharmacy benefits managers (PBMs) and insurer could also be a better place to negotiate lower drug costs and the deal could drive higher sales for CVS’ front-of-store retail business.

Analysts expect that the CVS-Aetna merger would bring in mid-single digit revenue increase, along with $750 million near-term synergies, as well as a platform from which to accelerate growth.

Still, the deal is still likely to face legal scrutiny by antitrust regulators, who are concerned about any company having too much consumer power.

Several investors stated that this could happen if the CVS-Aetna merger would stop Aetna customers from going to other pharmacies or contracting with other PBMs.

It is unclear whether the deal would be assessed by the US Federal Trade Commission or by the 

Department of Justice (DOJ).  

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