CVS will buy insurance giant Aetna in a roughly $69 billion deal that will protect a key client—and possibly protect itself from Amazon—a person with knowledge of the matter said Sunday. CVS will pay about $207 in cash and stock for each share of Aetna, according to the person, who spoke on condition of anonymity because the deal has not been announced publicly. That represents a 29% premium to the price of Aetna shares on Oct. 25, the day before the Wall Street Journal first reported about the possibility of a deal. The mammoth acquisition pairs a company that runs more than 9,700 drugstores and 1,100 walk-in clinics with an insurer covering around 22 million people. CVS is also one of the nation's biggest pharmacy benefit managers, processing more than a billion prescriptions a year for insurance companies, including Aetna. How CVS could benefit:
- Currently: CVS Health started adding clinics to its drugstores years ago and has been expanding the services they offer. Customers can get physicals, flu shots, treatments for sinus infections, cholesterol screenings, and help monitoring chronic conditions like diabetes. Analysts say clinics aren't especially profitable, but they are important because they draw people into the stores and help build deeper customer relationships. The Aetna deal could fuel a health care services expansion for CVS, with the company deciding to open more clinics or add services such as eye care or hearing aid centers.
- The Amazon angle I: The clinics also provide services that can't be purchased online. Like other retailers, drugstores are struggling to hold onto customers who are buying more goods through outlets such as Amazon. By expanding its medical services, CVS would essentially be "replacing aisles and products with services," says Jefferies analyst Brian Tanquilut.
- The Amazon angle II: The deal also will help CVS keep Aetna's business managing the insurer's pharmacy benefits. That could keep millions of customers away from Amazon if the retail giant decides to expand into prescription drugs. Investors have been worried about that prospect since reports about the possibility first appeared earlier this year.
- Other competition: CVS also has to worry about competition from UnitedHealth Group Inc. The nation's biggest health insurer also manages a large pharmacy benefits business, and it runs doctor practices and clinics.
Antitrust regulators still need to approve the deal, and that is not guaranteed.
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