Merger discussions continue to swirl around CVS and Aetna
CVS Health is nearing an agreement to acquire health insurer Aetna for more than $65 billion, according to a person familiar with the negotiations, in a deal that could reshape the pharmacy and health insurance industries.
An announcement could come as soon as Monday, said the person, who asked not to be identified because the talks are private. CVS is likely to agree to pay at least $200 a share for Aetna, with more than 30 percent paid for with cash, according to the person. Talks could still be delayed or fall apart.
The timing of the potential deal was first reported by The Wall Street Journal on Thursday. Aetna and CVS declined to comment.
A deal between Aetna and CVS could upend the health insurance, pharmacy and drug benefit sectors. Many of the biggest players in those industries are also looking over their shoulders at Amazon.com, which has been reported to be exploring various healthcare businesses.
It would also come less than a year after two major health insurance deals—between Anthem and Cigna, and Aetna and Humana—fell apart amid antitrust challenges.
Aetna’s shares are still trading well below the reported deal price, a sign that investors believe the deal may not close. Investors may be skittish about the amount of CVS stock included in the deal, because cost savings or revenue increases from the deal rely on melding two large, complex companies, said Ana Gupte, an analyst at Leerink Partners.
“It’s a vertical deal, it’s unproven, it’s defensive, it’s got more limited cost synergies, and the revenue synergies are unproven at best,” she said. “There may be some medical-cost savings or drug-cost savings, but they’d have to be likely passed on to customers” to keep them from defecting to rival companies.
A deal between the two companies could heighten speculation about the next moves of other players, including independent pharmacy chains and standalone pharmacy benefit management companies.
On Thursday, Express Scripts Holding Co.’s chief executive said he’s open to a deal with a health insurer or partnering with Amazon.com. CEO Tim Wentworth’s pharmacy benefits company has been battered by departing clients and the vague specter of Amazon’s entry into the drug business.
If a major insurer was interested in a deal, “I would be open to it,” Wentworth said on the sidelines of a conference in New York. “We don’t need to sell to be very successful in the future, but we are always open to others who may all of sudden conclude they want what we have.”