Partnerships / Acquisitions

CVS Acquisition Of Aetna Seen As Foil To Amazon’s Move Into RX

CVS is gearing up to announce a $69 billion cash and stock deal to acquire Aetna, in a move aimed at taking on Amazon, which is expected to enter the drug business.

Citing a source familiar with the situation, CNBC reported on Sunday (Nov. 3) that a deal will be announced shortly. According to the terms of the deal, Aetna stockholders would get $207 per share, $145 in cash and $62 in stock. A subsequent Reuters news report said the board of Aetna has approved the transaction.

The deal, which is the largest transaction in 2017 so far, comes amid increased pressure on insurers to lower the cost of medical services, as well as on retailers, which are facing increased pressure from new market entrances, such as Amazon.com.

By combining, the two will have more scale so they can bargain for better prices on prescription drugs. Passing on those cheaper prices to consumers could also stunt Amazon’s growth in the market. What’s more, an expanded retail footprint would be a cheap way to have more distribution centers and places for in-store clinics.

The idea is for CVS to use cheap clinics to save more than $1 billion a year on healthcare costs for Aetna’s close to 23 million members, sources told CNBC. The combined company plans to invest billions during the next few years to expand the number of clinics and offer more services, and will be financed mainly from moving money away from planned investments. The deal is also seen as a way to lower drug costs by adding more clients, which enables them to have more leverage when negotiating drug prices with drug makers.

If the deal is completed, Aetna shareholders would own around 22 percent of the combined company, and shareholders of CVS would own the remaining stake in the merged entity. The report noted that three of Aetna’s directors, which include CEO Mark Bertolini, would join the board of CVS.

The deal between the two is far from a sure bet, given that it could raise regulatory concerns. Analysts said the deal could spur more mergers and acquisitions in the market.

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