4 December 2017Insurance

CVS to acquire Aetna for $77bn, plans to cut costs

US drugstore operator CVS Health agreed to buy health insurer Aetna for a total value of $77 billion as it plans to push down costs.

The transaction values Aetna at approximately $69 billion. Including the assumption of Aetna's debt, the total value of the transaction is $77 billion.

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, according to a company statement.

"This combination brings together the expertise of two great companies to remake the consumer health care experience,” said CVS Health CEO Larry Merlo. “With the analytics of Aetna and CVS Health's human touch, we will create a health care platform built around individuals.”

Analysts at research firm CreditSights noted that there is long term merit to the transaction but warned about the massive surge in CVS debt as the merger plan includes $49 billion of new debt issuance.

CVS describes the impetus for the vertical merger as an opportunity to take costs out of the chain of healthcare, relying in part on lower cost treatment/consulting opportunities within the retail store network as well as the use of big data to prevent unnecessary hospital re-admissions, the analysts noted.

Management expects the deal to close in the second half of 2018. CreditSights analysts suggested the limited overlap between the two companies should allow the deal to pass regulatory muster despite the fact that healthcare mergers are under increasing levels of regulatory scrutiny.

Take part in our reader survey to be in with a chance to win a £3,000 corporate subscription to Intelligent Insurer

More of today's news

Carlou steps down as CEO of Patria Re

Compre group CEO steps down

Mapfre Q3 nat cat costs exceed €1.1bn, cuts US presence

UK court decision highlights corporate data leak risk

Alliant hires renewable expert for energy and marine group

Citizens keeps $6.4bn surplus after Irma

Ascent enhances cyber product to address “new wave of exposures”

Don't miss our insurtech email newsletter - sign up today

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk

More on this story

24 October 2017   Property/casualty insurer The Hartford has entered into a definitive agreement to acquire Aetna's US group life and disability business for a cash consideration of $1.45 billion.
7 December 2017   Ratings agency AM Best has places credit ratings of US health insurer Aetna and its insurance subsidiaries under review with negative implications following its planned acquisition by US drugstore operator CVS Health Corporation.
28 March 2019   Centene Corporation and WellCare, two big players in the US government-sponsored health insurance programme, have announced that they are merging in a deal worth $17.3 billion.