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CVS bid for Aetna could run $66 billion

por Thomas Dworetzky, Contributing Reporter | October 31, 2017
Business Affairs
After months of speculation about a possible deal, CVS is said to have bid to buy Aetna for about $66 billion.

“I think this deal has been a long time coming,” said Adam J. Fein, president of Pembroke Consulting, told the New York Times, noting that, “CVS has been positioning itself as a health care company and not a pharmacy for a long time.”

The move follows a search for deals across many sectors of health care by the retail drug chain in an effort to squeeze profits out of combinations of varied businesses in the fast-changing health care landscape.

CVS had also reached out to Anthem about a sale and UnitedHealth Group as well, unnamed sources told the Wall Street Journal.

Adding fuel to the fire is the potential of a move by Amazon into the prescription medicine sector. Last week, noted Bloomberg, the online giant was reported to have gotten pharmacy-wholesaler licenses in a dozen states. “Size and scale-wise, they can disrupt anywhere they want to disrupt,” noted Chip Davis, president of the Association for Accessible Medicines, according to Bloomberg.

The combination of the drugstore chain and Aetna would make a formidable player in the health services sector – it would be even larger that UnitedHealth Group, at present the biggest insurer to own clinics and maintain a pharmacy benefits division.

Estimates are that the CVS Aetna deal could lead to an Aetna stock price upwards of $200 per share. Aetna has a market cap of almost $60 billion, which would have to be covered in a mostly stock deal. CVS has a market value of about $75 billion.

Sources have told the Journal that if the deal is struck, the combined entity is likely to be run by CVS Chief Executive Larry Merlo.

CVS is already in the pharmacy benefits sphere, running benefits for employers and insurance firms, but the addition of Aetna would make the drugstore chain a medical insurer as well, and that would enhance its clout on the payer side with the ability to manage all sides of the health spending – from negotiating drug prices with suppliers to setting prices to consumers.

In addition, it would serve as another step toward transitioning its stores into full-service health centers, more like the increasingly prevalent walk-in clinics

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