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CVS Health’s Aetna Buyout to Change Healthcare Landscape


A momentous healthcare consolidation has commenced with CVS Health Corporation CVS deciding to acquire the U.S. health insurance giant Aetna Inc. AET for a colossal sum of $69 billion. Per a Yahoo Finance article by Julia La Roche, this one valuable deal could reshape the landscape of American health care.

Following this news, shares of the company have been slightly down (about 0.23%) in pre-market trading on Dec 4.

Deal Details

On Dec 3, CVS Health announced that under a definitive merger agreement, the company will acquire all outstanding shares of Aetna in cash and stock for approximately $207 per share or almost $69 billion (considering a rough estimate of Aetna's debt, the total transaction value is calculated at $77 billion). More specifically, Aetna’s shareholders will receive $145.00 per share in cash and 0.8378 CVS Health shares for each Aetna share.

CVS Health noted that the terms of this merger agreement have been unanimously approved by the respective board of directors of the two companies involved.

Post the close of the transaction, Aetna’s shareholders will own nearly 22% of the combined entity while CVS Health shareholders will acquire the rest. The company expects the takeover to complete in the second half of 2018, subject to approval by both the company’s shareholders, regulatory approvals as well as fulfillment of certain other customary closing conditions.

Synergy Benefit Forecast

On the deal’s successful completion, CVS Health expects to earn $750 million from near-term synergies with low to mid-single digit accretion in the second year post the transaction’s closure.

Per the company, shareholders can look forward to several outcomes with respect to near-term synergy including enhanced competitive positioning and a new combined platform that might redefine access to high-quality care at low cost, substantially accelerating the consolidated business’ growth. The acquirer is highly optimistic about this merger, slated to combine the analytics of Aetna with its ‘touch of humanity’ on the health care turf and help create a robust platform to serve individuals better.

Per CVS Health, this merger in the long term has great potential to deliver a significant incremental value as it is likely to spur development of new products and generate new-growth opportunities as a uniquely integrated retailer, pharmacy benefits manager and a far-sighted health planner.

Share Price Comparison

Shares of CVS Health have outperformed the broader industry over the past three months. The stock has dropped 3.5%, comparing favorably with the industry’s 9.1% decline during the same time frame. Its current value is however, lower than the S&P 500's 6.8% gain.

Zacks Rank & Key Picks

CVS Health carries a Zacks Rank #3 (Hold). Some better-ranked medical stocks are PetMed Express, Inc. PETS, Align Technology, Inc. ALGN and Myriad Genetics, Inc. MYGN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 73.5% over a year.

Align Technologyhas a long-term expected earnings growth rate of 28.9%. The stock has gained 170.3% in a year.

Myriad Genetics has a long-term expected earnings growth rate of 15%. The stock has soared 97.2% in a year.

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