CVS Health Corp. (NYSE:CVS), the largest drugstore chain in the US, has agreed to buy health insurer Aetna Inc. (NYSE:AET) for about US$69bn.
The combination could be the largest acquisition this year and comes amid reports that the pharmacy sector faces possible competition from Amazon.com Inc. (NASDAQ:AMZN).
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Amazon has received wholesale licenses from US state pharmacy boards in the past few months, sparking speculation that it could start selling prescription drugs.
Under the deal to create a new giant in the prescription drugs industry, Aetna will receive US$207 per share, including US$145 in cash and US$62 in CVS shares.
It represents a 30% premium to Aetna’s share price in late October when news of a potential deal emerged.
The total value of the deal, including Aetna’s net debt, is US$77bn.
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Shareholders in Aetna, the third-largest health insurer in the US by sales, will own about 22% of the combined company.
However, the deal requires approval by regulators and may be scrutinised closely for competition concerns.
Aetna’s US$37bn takeover agreement with rival Humana was blocked by regulators over competition concerns last year.
Meanwhile, worries about Amazon’s possible entry into the pharmacy space has led some analysts to see further mergers and acquisitions in the sector.
Health insurers Humana Inc. (NYSE:HUM), Anthem Inc (NYSE:ANTM) and Cigna Corp.(NYSE:CI) are expected to consider mergers with large retailers, such as Walgreens and Walmart, as they contend with rising drug prices and higher costs related to the Affordable Care Act.
Shares in CVS shed 4.76% to US$71.52 on the day. Aetna shares added 1.18% to US$179.15.