Deal of the Year: CVS to Buy Aetna for $69 Billion


Dec. 4 2017, Updated 10:08 a.m. ET

CVS buys Aetna for $69 billion

CVS Health (CVS), America’s largest pharmacy chain, announced a $69 billion deal to purchase Aetna (AET), the country’s third-largest insurance company, on December 3, 2017. The transaction values Aetna at $207 per share.

Shareholders will receive $145 per share in cash and 0.84 CVS Health shares for each Aetna share. Upon the close of the deal, CVS Health’s shareholders will have a 78% stake in the combined company, while Aetna shareholders will own the remaining 22%.

The total transaction value adds up to $77 billion after including debt. If approved, the deal is expected to close in the second half of next year.

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What management has to say about the deal

The deal is the largest in CVS Health’s history. To date, the pharmacy giant’s most significant purchase was Caremark for $21 billion in 2007.

“This combination brings together the expertise of two great companies to remake the consumer health care experience. With the analytics of Aetna and CVS Health’s human touch, we will create a health care platform built around individuals,” said Larry Merlo, CVS Health’s president and CEO.

“This is the next step in our journey, positioning the combined company to dramatically further empower consumers. Together with CVS Health, we will better understand our members’ health goals, guide them through the health care system and help them achieve their best health,” commented Mark Bertolini, Aetna chair and CEO.

What should investors look for?

The transaction is one of the largest of the year and will surely attract scrutiny from antitrust regulators. Competitors Walgreens Boots Alliance (WBA) and Rite Aid (RAD) faced several hurdles before finally settling for a much smaller deal than initially proposed.

Aetna’s proposed merger with medicare advantage insurer Humana also failed to get the FTC (Federal Trade Commission) nod earlier this year on concerns of reduced competition.

Investors looking for exposure to CVS can consider the Consumer Staples Select Sector SPDR Fund (XLP), which invests 4.2% of its portfolio in the company.


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