CVS Health Proposes To Acquire Aetna: Eight Fast Facts — John G. Baresky
…An innovative and competitive move if the debt load can be effectively managed…
…The healthcare industry continues to evolve; business models within the sector are changing and propelled by large scale merger and acquisition initiatives…
The proposed CVS Health / Aetna deal combines two healthcare industry leaders with wide and deep reach across commercial and consumer business sectors nationwide. Both organizations are well-established and as a combined tandem, represent a significant competitive threat to Centene, Cigna, Express Scripts, Fred’s Pharmacy, Humana, Kaiser, Optum / UnitedHealth Group, Prime Therapeutics, Rite Aid, Walgreens-Boots Alliance, Walmart and select Blue Cross Blue Shield plans (CVS Health recently formed a strategic alliance, IngenioRx, with Anthem, the largest BCBS affiliate).
“This year’s largest corporate acquisition will combine one of the nation’s largest pharmacy benefits managers (PBMs) and pharmacy operators with one of its oldest health insurers, whose national business ranges from employer healthcare to government plans”
Eight Fast Facts…
- CVS Health will pay about $69 billion for Aetna; Aetna stockholders will receive $207 per share, $145 in cash and $62 in stock
- Aetna, based in Hartford, Connecticut, was founded in 1853; CVS Health, founded in 1963, is headquartered in Woonsocket, Rhode Island
- Roundly calculated figures reveal CVS Health employs about 158,000 persons; Aetna has over 49,000 employees
- Within the latest Fortune 500 rankings, CVS Health is listed at number 7; Aetna is placed at number 47
- CVS Health produces over $146 billion in annual sales; Aetna’s annual sales exceed $63 billion
- CVS Health operates more than 9,700 retail stores (including more than 600 pharmacies within Target stores) and is one of the leading pharmacy benefit management ( PBM ), home infusion and specialty pharmacy companies in the United States
- Aetna is a global organization which includes Coventry Health Care and Continental Life Insurance; it offers conventional and consumer-directed health insurance comprised of medical, pharmacy, dental, behavioral health, long-term care and disability plans
- The CVS Health and Aetna deal needs to be approved by regulators; either the U.S. Department of Justice ( https://www.justice.gov/ ) or the Federal Trade Commission ( https://www.ftc.gov/ ) will review their case
The CVS Health / Aetna deal is also viewed by some as a preemptive move in anticipation of the various strategies Amazon may deploy in its widening entry into the healthcare sector. Optum / UnitedHealth Group has already undertaken an assertive strategy to diversify its business model through strategic acquisitions of physician practice groups. These include buying Surgical Care Affiliates ($2.3 billion) and DaVita’s medical group ($4.9 billion).
Antitrust concerns are paramount for acquisitions in the healthcare provider and healthcare insurance sectors. Regulators will carefully assess the proposed arrangement from multiple perspectives. If approved, CVS Health and Aetna will be busy with executing integration initiatives to optimize the combined attributes of their new company.
To finance the deal, CVS Health reportedly plans to issue $44.8 billion in new debt plus $21 billion in new equity and deploy about $4.1 billion of cash on hand. CVS Health is taking on about $8 billion of Aetna debt which will stack on to CVS Health’s current debt of almost $23.5 billion. Cost cutting and other financial belt-tightening measures will get underway quickly if regulators grant their approval; these will challenge the new company to effectively compete while equally meeting customer service and shareholder expectations.
Undoubtedly, CVS Health / Aetna competitors will be assessing their business models and strategically evaluating their merger & acquisition options moving forward.
Thank you for reading this article; check out these other stories about healthcare mergers and acquisitions; connect with me further through reading my other Medium articles or through my social media links:
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…CVS Health and Aetna Image courtesy of the Washington Examiner…