Health insurance giant Aetna is to be acquired by pharmacy and healthcare service provider CVS Health, in an M&A transaction estimated to be worth around $77 billion.
CVS Health will acquire all of Aetna’s outstanding shares using a combination of cash and stock. Aetna shareholders will receive $145.00 per share in cash and 0.8378 CVS Health shares, in return for each Aetna share.
The deal puts the value of Aetna at approximately $69 billion, but once Aetna’s debt has been assumed as well the total value of the transaction is said to be $77 billion.
The pair hope to recognise synergies, by bringing together a health insurer with 20 million policyholders, with a pharmacy chain that has 9,700 pharmacy locations and 1,100 MinuteClinic walk-in clinics.
The companies said that the deal will answer an “unmet need in the current health care system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings—whether in the community, at home, or through digital tools.”
CVS Health President and Chief Executive Officer Larry J. Merlo, commented on the acquisition news, “This combination brings together the expertise of two great companies to remake the consumer health care experience. With the analytics of Aetna and CVS Health’s human touch, we will create a health care platform built around individuals. We look forward to working with the talented people at Aetna to position the combined company as 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.”
The deal sees CVS moving towards becoming a full-spectrum healthcare provider, while Aetna moves beyond being just an insurer, to a company focused on consumer well-being, the announcement said.
“This is the next step in our journey, positioning the combined company to dramatically further empower consumers. Together with CVS Health, we will better understand our members’ health goals, guide them through the health care system and help them achieve their best health,” added Mark T. Bertolini, Aetna chairman and CEO. “Aetna has a proud tradition of continually innovating to address unmet consumer needs and providing leading products and services to the marketplace.
“Aetna has a talented and dedicated group of employees working to build a healthier world every day. Our combined company will be more competitive in the marketplace and accelerate progress toward achieving this mission.”
The two companies expect the deal will result in $750 million in near-term synergies and provide a platform for accelerated future growth.
CVS Health said it will fund the cash portion of the transaction through a combination of existing cash on hand and debt financing.
Three of Aetna’s directors, including Aetna’s Chairman and CEO Mark T. Bertolini, will be added to the CVS Health Board of Directors, once the acquisition closes.
Aetna’s senior management team will play significant roles in the newly combined company as well and Aetna will operate as a stand-alone business unit within the CVS Health enterprise, led by some of the current management team.
In terms of scale and transaction value, this is one of the largest insurance related M&A deals. It also presents an interesting combination of financial services, with bricks and mortar retail locations, which could offer Aetna’s insurance products a compelling distribution network, while CVS benefits from the way an insurance product could generate greater customer loyalty.
