Small Window Open for Signify Stock Before CVS Acquisition

Rachel Curry - Author
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Sep. 6 2022, Published 12:28 p.m. ET

The stock for Signify Health Inc. (SGFY) is trending upwards amid news of an official acquisition by major drugstore chain CVS Health Corp. (CVS). Is Signify stock a buy or should investors hold out?

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Here’s a rundown on the CVS-Signify deal and what the best path forward is for retail traders eyeing Signify stock ahead of the merger.

CVS will officially acquire Signify — here are all the details.

About a month after news broke of advanced talks between drugstore chain CVS and in-home healthcare tech company Signify, the two companies have agreed to a deal. CVS will acquire Signify in a deal that values SGFY stock at $30.50 per share. This amounts to $8 billion for the Signify purchase.

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CVS will reportedly use cash and other resources to make the acquisition while maintaining its credit. While Signify stockholders must approve the deal for it to proceed, the stock’s favorable valuation makes it a sure thing.

Let's see where SGFY stock stands.

Despite the acquisition, Signify Health will retain its shape as an arm within CVS. Signify’s chief executive Kyle Armbrester will retain his position at the helm of the arm. However, the acquisition means CVS stock will absorb SGFY stock as its own asset, ultimately taking Signify shares private.

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Shares of SGFY hit $28.78 per share by market close on Friday, Sept. 2. The buyout price of $30.50 per share marks a nearly 6 percent premium from the previous close.

Discussions of the buyout over the last few months have sent SGFY stock upward. In August, Amazon Inc. (AMZN) was considered a contender in the bid for Signify (in July, Amazon bought primary care company One Medical for $3.9 billion, so it already had a blatant move in the healthcare sector). While CVS got the bait, Signify stock benefited from these murmurs.

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SGFY stock is up 31.52 percent in the month ending on Sept. 6 and 92.82 percent YTD. While the broad market continues to experience a strong dose of volatility throughout the year, SGFY has gone in a different direction.

The stock first went public in February 2021 and remains down about 20 percent all time.

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The CVS-Signify deal will close in the first half of 2023.

CVS is set to finalize its Signify acquisition by H1 of 2023. Majority shareholder New Mountain Capital has already agreed to vote in favor of the transaction. CVS chief financial officer Shawn Guertin wrote in a statement, “We expect the acquisition to be meaningfully accretive to earnings and, as a result, are increasingly confident we can achieve our long-term adjusted [earnings per share] goals as outlined.”

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Meanwhile, Armbrester wrote, “CVS Health is the ideal partner, given its focus on expanding access to health services and helping consumers navigate to the best sites of care.”

Should you buy SGFY stock before CVS finalizes its acquisition?

SGFY stock is hovering close to its buyout price of $30.50 per share. Investors should only enter a position if the share price remains below this value (with a return that makes the transaction worthwhile).

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Stay tuned to the stock’s trajectory over the coming days and weeks to determine if a buy-in makes sense.

As for whether CVS stock is a good alternative, look at the long game to determine if it fits within your strategy. CVS stock tends to be volatile in the short term but shows decent long-term reliability.

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