=Aetna (AET) to be acquired by CVS Health (CVS) for $207 per share

CVS Health acquired Aetna (AET) for roughly $69B in cash and stock, creating the first healthcare triple threat that will combine pharmacy, benefit manager platforms and insurance. CVS's deal comes as insurers are under pressure to lower medical costs, and retailers are under attack from new competitors.

Aetna confirms acquisition by CVS Health (CVS) in transaction worth $207 per share ($145.00 per share and 0.8378 CVS Health shares for each Aetna share) 

• CVS Health (CVS) and Aetna (AET) announced the execution of a definitive merger agreement under which CVS Health will acquire all outstanding shares of Aetna for a combination of cash and stock. Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of each company, Aetna shareholders will receive $145.00 per share in cash and 0.8378 CVS Health shares for each Aetna share.
• The transaction values Aetna at approximately $207 per share or approximately $69 billion
• Including the assumption of Aetna's debt, the total value of the transaction is $77 billion.
• Financing of the Transaction - CVS Health intends to fund the cash portion of the transaction through a combination of existing cash on hand and debt financing.
  • The transaction is not contingent upon receipt of financing. Barclays, Goldman Sachs and Bank of America Merrill Lynch are providing $49 billion of financing commitments.

Many analysts view the combination of CVS and Aetna as a defensive move by the companies. CVS Health, which also recently signed an agreement with Anthem to help the insurer start its own internal pharmacy benefit manager, is looking to protect its business with Aetna as it fends off rivals like UnitedHealth Group’s OptumRx and others. Aetna, foiled in its attempt to buy Humana, is searching for new ways to expand its business.

The merger could also fundamentally reshape the business of overseeing drug coverage for insurers, an industry that is dominated by three large players and that has increasingly come under scrutiny over the past year as public anger over high drug prices has expanded beyond the usual culprits — most notably the pharmaceutical industry — to lesser-known players like pharmacy benefit managers.

A combination of a drugstore company and an insurer is considered less problematic than a merger of two players in the same business, which could reduce competition and hurt consumers. Such concerns ultimately sank Aetna’s efforts to buy Humana, and Anthem’s push to buy Cigna, when the Obama administration signaled its opposition to such consolidation.

CVS’s proposed takeover of Aetna is a so-called vertical merger, combining companies in two different industries. But while such deals have traditionally met little opposition in Washington, the Justice Department has sued to block AT&T’s $85.4 billion takeover of Time Warner on the grounds that it would create too powerful of a content company.

David A. Balto, an antitrust lawyer who has been sharply critical of combinations among insurers and pharmacy benefit managers, said that he was wary of having retailers in charge of people’s health. He argued that doctors may be in a better position to treat illness than retail executives.