CVS Health to buy Aetna for $69 billion

US drugstore chain CVS Health has agreed a $69 billion (€58 billion) takeover of health insurer Aetna in a deal which could have significant implications for the healthcare industry in the US.

CVS - a top 10 Fortune 500 company, with revenues of about $177 billion in 2016 - is the largest drugstore operator in the US, with just under 10,000 stores nationwide.

Aetna is a major US healthcare firm which specializes in health insurance and other related services, such as providing treatment plans for patients across a variety of areas.

The deal, if approved by regulators, will create a new giant in US healthcare, particularly in the prescription drugs sector. It is indicative of an ongoing transformation in the healthcare industry, which is increasingly consolidating services that traditionally were kept separate.

If and when the takeover goes through, the central idea is that the thousands of CVS drugstores across the US will be effectively transformed into community care centers, where detailed and longer-term health advice and treatment plans can be added to the normal business of the drugstore.

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Under the terms of the agreement, announced on Sunday, Aetna shareholders will receive $207 per share, with $145 of that in cash and $62 in CVS stock. If the deal goes through as fully proposed, Aetna shareholders will own just under a quarter of the newly-formed company.

'People trust their pharmacist'

Both companies claim the deal will transform CVS drugstores into multi-dimensional healthcare sites, providing various community-based healthcare services at better value for customers.

"We know we can make health care more affordable and less expensive," said CVS Health CEO Larry Menlo on the announcement of the deal.

"When you walk into CVS there's the pharmacy. What if there's a vision and audiology center, and perhaps a nutritionist, and some sort of care manager?" he added.

Mark Bertolini, the Aetna CEO, emphasized CVS Health's already-established community base as a major motivation for the deal. "It's in their community. It's in their home. CVS has the draw. People trust their pharmacist," he said.

The companies say that should the deal go through by the second half of 2018, they expect cost synergies amounting to some $750 million by 2020.

Unite and conquer?

The deal comes at a time of significant change in US healthcare. From rapidly rising medical costs, particularly in the area of prescription drugs, to continuing political uncertainty over the future of the Affordable Care Act, nicknamed "Obamacare," healthcare services have been looking for new ideas to deal with the challenges.

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A particularly significant area of change is the way in which technology has coaxed non-medical corporate giants, such as Amazon, into the market.

The e-commerce giant has recently received licenses with US pharmacy boards, meaning it could soon start selling prescription drugs on its dominant online platform.

The thoughts of having such fearsome competitors enter the market have led to attempts at consolidation between traditional US healthcare operators.

Aetna was recently foiled by antitrust authorities in its bid to take over Humana, another major US insurer, while similar doubts floored a proposed deal between Anthem, another insurer, and Cigna, a managed healthcare services provider.

Watching closely

Concerns about competition could yet disrupt the CVS-Aetna deal. While both companies have promoted the idea that coming together would ultimately be a good thing for consumers, there are fears that such a powerful operator could significantly limit consumers' options in terms of where to obtain their prescriptions.

The CVS-Aetna deal is a so-called "vertical merger," one which combines companies that are not strictly in the same line of business - in this case, a drugstore chain and a health insurer.

Analysts expect the deal to ultimately go through - such vertical merger deals generally don't fall foul of antitrust regulators. Nonetheless, investors will be watching closely how this one unfolds in 2018.

aos/sri (Reuters, dpa)