CVS to buy insurance giant Aetna in $69bn deal

CVS will buy insurance giant Aetna in a roughly $69bn deal that will help the drugstore chain provide more healthcare and keep a key client, according to a person with knowledge of the matter.

The person said on Sunday that CVS Health will pay about $207 in cash and stock for each share of Aetna. The person spoke on condition of anonymity because the deal has not been announced publicly.

Reports of a possible deal first surfaced in late October.

The deal pairs a company that runs more than 9,700 drugstores and 1,100 walk-in clinics with an insurer covering about 22 million people. It deal could provide new customers for CVS stores which offer a growing list of medical services.

That could help fuel a push by CVS to become more of a one-stop-shop for healthcare, a place where patients can get blood drawn, see a nurse practitioner and pick up prescriptions.

“If you think about it, we actually don’t have anything like that,” Jefferies analyst Brian Tanquilut said recently.

CVS Health started adding clinics to its drugstores years ago and has been expanding such services. Customers can get physicals, flu shots or treatments for sinus infections. They also can receive cholesterol screenings or find help monitoring chronic conditions like diabetes.

Analysts say clinics are not especially profitable, but they are important because they draw people into the stores and help build deeper customer relationships.

The clinics also provide services that cannot be purchased online. Like other retailers, drugstores are struggling to hold on to customers who are buying more goods through outlets such as Amazon.

By expanding its medical services, CVS would essentially be “replacing aisles and products with services”, Tanquilut noted.

He and others on Wall Street expect the Aetna deal to help CVS open more clinics or add services such as eye care or hearing aid centers. The deal will also help CVS keep Aeta’s business managing the insurer’s pharmacy benefits.

That could keep millions of customers away from Amazon if the retail giant decides to expand into prescription drugs. Investors have been worried about that prospect since reports about the possibility first appeared earlier this year. Amazon has not commented on the possibility.

CVS also has to worry about competition from UnitedHealth. The nation’s biggest health insurer also manages a large pharmacy benefits business and runs doctor practices and clinics.

Antitrust regulators still need to approve the deal, and that is not guaranteed. The justice department said last month that it was suing AT&T to stop its $85bn purchase of Time Warner. Regulators also sued to stop the Aetna’s approximately $34bn purchase of rival Humana, a deal that fell apart earlier this year.

Hartford, Connecticut-based Aetna and Woonsocket, Rhode Island-based CVS both manage Medicare prescription drug coverage. Some of that business may have to be sold to address antitrust concerns.

Otherwise, Leerink analyst David Larsen said, a CVS-Aetna combination has decent odds of getting past regulators, in part because the businesses have little overlap.

“We also believe that the Trump administration is more business-friendly, and regulators may view a CVS/Aetna combination as a way to continue to put pressure on manufacturers and drug prices,” Larsen said in a recent research note.

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