Comprehensive M&A data with integrated detailed company information
CVS, Aetna megadeal creates one-stop hub
Posted on Monday, 04 December 2017 12:58
CVS Health has announced 2017’s largest merger and acquisition to date as the pharmacy operator seeks to alleviate mounting pressure within the sector by acquiring US health insurance giant Aetna for USD 77.00 billion.
The media has jumped all over the Rhode Island-based drugstore chain’s decision to create an all-in-one provider at a time when Amazon is reportedly considering entering the segment.
In terms of the actual takeover, which could turn stores into community medical hubs for primary care and basic procedures, CVS has won Aetna over with a cash and stock offer worth about USD 207.00 per share.
The pharmacy benefits manager will pay USD 69.00 billion, and will also assume Aetna debt, in order to meet challenges posed by an increase in healthcare costs and an ageing US population, among other things.
At USD 77.00 billion, the acquisition dwarfs the USD 49.40 billion British American Tobacco-Reynolds American takeover which Zephyr, the M&A database published by Bureau van Dijk, shows was previously 2017’s largest announced deal.
CVS and Aetna shareholders would own 78.0 per cent and 22.0 per cent, respectively, of the resulting entity created once the deal closes in the second half of 2018.
As a Fortune 4 company, this new, self-proclaimed healthcare leader would have more than USD 18.00 billion in pro forma adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).
The combination of CVS and Aetna would lead to pro forma adjusted EBITDA of USD 18.50 billion on revenue of USD 221.40 billion, while new debt of USD 44.80 billion would result in pro forma leverage of 4.6x.
However, any deal would first need to make it over the antitrust hurdle; the Justice Department has already blocked one merger – between Aetna and Humana worth USD 37.00 billion – this year on competition grounds.
One factor on their side is the acquisition does not involve competitors; as Fortune points out, it is a vertical move rather than a horizontal one.
© Zephus Ltd