CVS Health Corp (NYSE:CVS) which has reportedly been in the market for a medical services acquisition since last year, agreed to snap up Oak Street Health Inc, a primary care company that offer routine health screenings and diagnosis to older adults, for about $10.6 billion including debt.
In a statement, the Rhode Island-based healthcare giant said it has struck a definitive agreement under which it will acquire Oak Street Health in an all-cash transaction at $39 per share, representing an enterprise value of around $10.6 billion. The all-cash deal is expected to close in 2023.
According to CNBC, the deal, CVS’ third largest in the last decade, echoes moves by rivals Walgreens Boots Alliance, Cigna (NYSE:CI) and tech giant Amazon, as focus on healthcare, especially primary and urgent care delivery, grew during the pandemic.
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The Oak Street deal will give CVS significant muscle, consolidating the firms that manage health benefits, pay for medical care and provide the treatment.
Primary care muscle
CVS will now get control over Oak Street Health’s approximately 600 primary care providers and 169 medical centers across 21 states.
CVS Chief Executive Karen Lynch has said that adding primary-care doctors was a company priority.
"Enhancing our value-based offerings is core to our strategy as we continue to redefine how people access and experience care that is more affordable, convenient and connected," Lynch said in a statement.
Founded in 1963 as a retailer focused on beauty and health products, CVS has used acquisitions to become one of the biggest healthcare companies in the US. CVS owns pharmacy retail chain CVS Pharmacy, pharmacy benefits manager CVS Caremark, and health insurance provider Aetna among many other brands.
Following the close of the transaction, Oak Street Health CEO Mike Pykosz will continue to lead Oak Street Health, which will become part of CVS Health's recently formed Health Care Delivery organization.
Oak Street Health will continue to serve its extensive network of health plan partners and patients – consistent with CVS Health's payor-agnostic approach to delivering leading solutions.
In September, CVS also agreed to buy home healthcare services company Signify Health in an $8 billion deal, which has been under a tough antitrust review. Signify conducts home assessments, mostly for patients enrolled in Medicare.
The Biden administration has indicated that its antitrust enforcers will closely scrutinize large healthcare mergers.
Lynch said in the interview that CVS was confident its Oak Street deal wouldn’t raise concerns. “We feel strongly that there is no anticompetitive relationship here, because it is a separate type of business that we’re not currently in,” she told The Wall Street Journal.
CVS also reaffirmed its 2023 profit outlook of $8.70-$8.90 per share.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive