U.S. drugstore chain operator CVS Health Corp has agreed to acquire U.S. health insurer Aetna Inc for $69 billion, as it seeks to combat the increase healthcare spending through lower-cost medical services in its pharmacies. This is the year’s largest corporate acquisition and it combines one of the nation’s main pharmacy benefits managers (PBMs) with one of the oldest health insurers.
This deal comes after Aetna’s $37 billion proposal to purchase its smaller competitor, U.S. health insurance Humana Inc, was stopped by a U.S. federal judge because of antitrust matters in January. A combination of the healthcare companies Anthem Inc and Cigna Corp was also proposed and denied.
In the deal, Aetna shareholders will receive $207 per share, according to both companies. The consideration contains $145 per share in cash and 0.8378 CVS shares for each share of Aetna. Aetna shareholders will own around 22 percent of the combined company, while CVS shareholders will own the majority.
The companies stated that the cost synergies predicted for the second full year after the deal is signed, which would be 2020 if the deal is closed during the second half of 2018, would total to $750 million. They predicted the combined company to improve the adjusted earnings per share by low or mid-single digit percentage points.
The acquisition arises as healthcare payers and pharmacies are acting to a change in surroundings, such as changes in the Affordable Care Act, increased drug prices and the competition from online retailers like Amazon.com Inc. CVS intends to utilize its low-cost clinics to provide medical services to Aetna’s 23 million members. In addition to health clinics and medical equipment, CVS could aid with vision, hearing and nutrition.
Analysts believe that the CVS-Aetna deal may provoke other healthcare sector mergers, as competitors struggle for a strategy.