Speculation turned to fact following Sunday's announcement from CVS Health (CVS 71.90, -3.22, -4.3%) that it has entered into a definite merger agreement with health insurer Aetna (AET 183.10, +1.80, +1.0%) whereby it will acquire all outstanding shares of Aetna for approximately $69 billion, or $207 per share, in cash and stock.
The specific terms call for AET shareholders to receive $145.00 per share in cash and 0.8378 CVS shares for each AET share they own. Including debt, the total value of the transaction is $77 billion.
This deal is a big deal both in terms of its size and strategic approach, as CVS Health is setting the stage to be a more complete healthcare provider with services that include retail pharmacies, walk-in medical clinics, pharmacy benefits management, and health care benefits.
Some see the deal to acquire Aetna as a move to fend off the possible encroachment by Amazon.com (AMZN 1167.18, +4.83, +0.4%) into the health care industry.
Strikingly, the ability to offer better, and lower cost, health care, using more integrated data and analytics was touted as one of the benefits of the merger.
CVS Health expects the transaction to produce low- to mid-single digit accretion in the second full year after the close of the transaction, which is expected in the second half of 2018. The outlook for earnings accretion has been linked to an ability to achieve $750 million in near-term synergies and to accelerate growth with a broader platform of services.
The bid to acquire Aetna will come under antitrust review, although it is thought the deal has a good chance of passage since CVS isn't acquiring a direct competitor.
Some of CVS Health's better-known competitors include the likes of Walgreens Boots Alliance (WBA 70.93, -0.52, -0.7%), Express Scripts (ESRX 67.09, +2.68, +4.2%), and Humana (HUM 261.38, +2.85, +1.1%), which could conceivably be linked to M&A speculation now that CVS has made the bold, and pro-active, move of increasing its competitive footprint.