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CVS, Aetna to merge

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WOONSOCKET, R.I. — CVS Health’s agreement to buy Aetna for roughly $69 billion can transform the health care system as well as both companies, say analysts. The deal creates the first health care company integrating pharmacies, a pharmacy benefits manager and insurance business. It connects Aetna’s extensive network of providers with CVS’ multiple health access points and services, including more than 9,700 pharmacies, over 1,100 walk-in clinics, long-term care pharmacy, infusion services and over 4,000 nursing professionals. It comes as insurers are under increasing pressure to lower medical costs, and chains are facing threats from new competitors, including a more powerful Amazon.

“We share management’s views on the need for a more integrated and community-based health care approach and believe that CVS is a strategic asset that has the ability to position itself as a unique player that can provide a solution to this void in the U.S. health care system,” said Jefferies LLC analyst Brian Tanquilut. “Given our long-standing positive stance on health care consumerism and the shifting of patients to outpatient and home-based settings, we share management’s view that there is a need that CVS can fill by transforming its retail pharmacies into health hubs that will enhance consumer access to health care services and, over the long run, bring down costs.”

Baird analyst Eric Coldwell said the deal’s benefits included combining medical and pharmacy claims, and improvements in big data and analytics. The acquisition creates “interesting angles to differentiate and innovate,” he wrote.

CVS Health president and chief executive officer Larry Merlo said, “This transaction will create a leading health care platform that will revolutionize the consumer health care experience. This compelling strategic combination will unlock meaningful value for patients, payers, providers and shareholders. It also fills an unmet need in the current health care system and presents a unique opportunity to redefine access to high-quality care in lower-cost, local settings, whether in the community, at home or through digital tools.”

CVS will buy all outstanding shares of Aetna for a combination of cash and stock. Under the terms of the deal, which was unanimously approved by the boards of both companies, Aetna shareholders will receive $145 per share in cash and 0.8378 CVS Health shares for each Aetna share. The transaction values Aetna at approximately $207 per share, or about $69 billion. Including the assumption of debt, the total value of the transaction is $77 billion.

“This combination brings together the expertise of two great companies to remake the consumer health care experience,” Merlo added. “With the analytics of Aetna and CVS Health’s human touch, we will create a health care platform built around individuals. We look forward to working with the talented people at Aetna to position the combined company as America’s front door to quality health care, integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers.”

He pointed out that this is a natural evolution for both companies as they strive to place the consumer at the center of health care delivery. “CVS Health has steadily become an integrated health care company, and Aetna has moved beyond being a traditional insurer to focus more on consumer well-being,” he said.

Merlo said members of the Aetna management team will play major roles in the newly combined company, operating the insurer as a stand-alone business unit within the CVS Health enterprise.

Mark Bertolini, Aetna chairman and CEO, called the transaction “a major step forward in creating consumer-centric health care. 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. Aetna has a proud tradition of continually innovating to address unmet consumer needs and providing leading products and services to the ­marketplace.”

The insurance company has “a talented and dedicated group of employees working to build a healthier world every day,” he added. “Our combined company will be more competitive in the marketplace and accelerate progress toward achieving this mission.”

Upon the closing of the deal, expected in the second half of 2018, Bertolini and two other Aetna directors will be joining the CVS board.


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