CVS HEALTH CORPORATION Stock Monitor: Aetna Post Earnings Reporting
LONDON, UK / ACCESSWIRE / December 06, 2017 / Active-Investors issued a free report on CVS Health Corp. (NYSE: CVS), which is readily accessible upon registration at www.active-investors.com/registration-sg/?symbol=CVS as the Company's latest news hit the wire. On December 03, 2017, the Company announced that it has entered into a merger agreement to acquire all outstanding shares of Aetna Inc. (NYSE: AET) in a cash plus stock deal. The total transaction is valued at $77 billion, including Aetna's debt. The deal has approved by the Board of Directors of both companies. The merger would create an integrated healthcare company offering the complete gamut of healthcare needs under one. It will combine CVS' network of 9,700 drugstores and 1,100 walk-in clinics with Aetna's over 22 million customers. Sign up now for our free research reports at:
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Details of the merger
CVS has agreed to pay Aetna's shareholders $145 in cash and 0.8378 in CVS Health's shares for each share of Aetna they hold. The deal values Aetna at approximately $207 per share, or approximately $69 billion. If the value is calculated after adding Aetna's debt, the transaction value is approximately $77 billion. The transaction is expected to close in H1 2018 and is subject to receiving regulatory and shareholders' approvals and other closing conditions.
Once the merger is completed, CVS' shareholders will own approximately 78% stake and Aetna's shareholders will own approximately 22% stake in the merged company.
CVS plans to finance the cash portion of the transaction via a mix of cash in hand and debt. CVS has received financing commitments from Barclays, Goldman Sachs, and Bank of America Merrill Lynch for approximately $49 billion. However, the deal is not contingent upon receipt of financing.
On completion of deal, Aetna will become a part of CVS and operate as a stand-alone business unit and Aetna's current management team will continue to helm the business and play a significant role in the merged company. On closure of the transaction, three members of Aetna's Board, including Mark T. Bertolini, Chairman and CEO of Aetna, will join CVS' Board.
Commenting on the acquisition, Larry J. Merlo, President and CEO of CVS Health, said:
?With the analytics of Aetna and CVS Health's human touch, we will create a healthcare 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 healthcare professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers.?
Mark T. Bertolini, Chairman and CEO of Aetna, added:
?This is the next step in our journey, positioning the combined Company to dramatically further empower consumers. 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. Our combined Company will be more competitive in the marketplace and accelerate progress toward achieving this mission.?
Benefits of the transaction
CVS expects that the transaction will be accretive in the low- to mid-single digit from the second year of closing. The transaction is expected to result in synergies of approximately $750 million in the short-term and is also projected to deliver significant incremental value in the long-term based on new products and services offered that will be unique to it. Aetna's shareholders received a great opportunity to unlock the value of their investment in terms of cash of $145 per share as well as continued involvement in the future growth and success of the merged company.
On the business end, the merged company will be better positioned to meet the health needs of its customers by offering integrated healthcare services and products at low costs. Drugstore chains like CVS and health insurers like Aetna are looking at ways to reduce healthcare costs for their clients so that they have better access to medication and care. CVS would be able to reduce costs of drugs by negotiating better terms with pharmaceutical companies. Aetna's customers will be able to get better insurance coverage given the lower costs of drugs and health care. The merged company would be relying on the use of data and analytics which will not only improve patient's health but also lower costs. Customers with expensive chronic conditions like diabetes would greatly benefit from the merger as they will receive well-rounded care and support including counseling which would result in better control of their blood sugar levels and better health. This would be helpful to both doctors as well as the patients in the long-run.
CVS plans that their drugstores at many locations will act more as a community-based health hub dedicated to improving health and get information about health conditions, prescription drugs, and health coverage. On top of drugs, these stores will have space for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty, and medical equipment.
Reaction from Industry experts
Industry experts believe that the CVS-Aetna merger could also be the result of the fear caused by speculations of Amazon entering the pharmacy business. Apart from Amazon, the deal would allow the merged company to have an advantage over the other players, such as like Walgreens, Walmart, etc., within the pharmacy market.
The major hurdle for the deal is getting approval from the antitrust regulators, given that the Aetna-Humana merger could not be completed due to antitrust issues raised by the regulators. However, industry experts feel this deal has a better chance because there is no major overlap in the business of both companies. Now all eyes are on the decision of regulators.
Stock Performance Snapshot
December 05, 2017 - At Tuesday's closing bell, CVS Health's stock slightly dropped 0.95%, ending the trading session at $71.01.
Volume traded for the day: 15.16 million shares, which was above the 3-month average volume of 8.40 million shares.
Stock performance in the last month ? up 2.54%
After yesterday's close, CVS Health's market cap was at $72.15 billion.
Price to Earnings (P/E) ratio was at 14.66.
The stock has a dividend yield of 2.82%.
The stock is part of the Healthcare sector, categorized under the Health Care Plans industry.
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