CVS Health has announced it will buy insurer Aetna for about $69 billion, a deal which potentially could reshape America’s healthcare industry.
Both companies announced the acquisition Sunday, which had been the subject of negotiations for months.
CVS will pay $207 per share for Aetna and its debt, and Aetna shareholders will receive $145 per share and about 0.84 of a CVS share for each Aetna share, the statement said.
The combination of the two businesses would combine CVS, with 9,000 pharmacy stores and over 1,000 walk-in clinics, with Aetna, an insurance company which covers over 22 million customers.
The merger demonstrates the changing nature of the healthcare industry and could easily offer one-stop healthcare services at lower prices through walk-in, phone and online services instead of a through doctor visit. A combined company could use CVS pharmacies to directly provide care to Aetna customers. The merger would establish a new way of delivering care, with onsite nurses and pharmacists prepared to offering counseling and care. It is also an action to head off potential new competitors, notably Amazon.com., which has been considering an entry into the healthcare industry.
“We think of it as creating a new front door to health care in America,” CVS Health CEO Larry J. Merlo told The New York Times. “We know we can make health care more affordable and less expensive.”
The merger could fundamentally change the way healthcare is delivered in the United States.
“This transaction fills an unmet need in the current health care system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings, whether in the community, at home, or through digital tools,” the joint statement from both companies said.
Together, the two companies are involved in most basic health needs of Americans.
Amana Stare of Northwestern University’s Kellogg School of Business told NPR that CVS is already more than “the drugstore on the corner.
“It will allow them to have a large, captive audience for that insurance arm, and that might allow them to do a couple of things. They might be able to negotiate lower drug prices from manufacturers by virtue of their sheer size.”
The CVS Health-Aetna union is an example of a vertical merger of companies in two different industries, which federal regulators tend not to discourage.
Although the deal will require government approval, the breakup fee — payable to Aetna by CVS if a deal cannot be approved — is not large, reflecting the companies’ confidence the transaction will be approved.