A deal the size of the one that CVS is going through with Aetna at the moment is not something that you see every day. They are offering to purchase another giant in the health care industry. That giant is Aetna.
The price tag for this deal as reported by CNBC is approximately $69 billion. This is the type of deal that is reviewed by regulators before it is approved. In fact, Aetna had a deal in the works with Humana before, but it fell through when the government blocked the deal on the grounds that it would violate anti-trust laws. Therefore, CVS could not be sure that it would be able to tie the knot with Aetna. However, they did get the green light on this one.
This is one of the biggest deals of the year, and it is one that has been eagerly awaited by many. CVS is said to be paying $207 per share of Aetna. That will be $145 in cash, and the other $62 will come in the form of CVS stock. Shareholders of Aetna will receive that when this deal gets finalized.
CVS is believed to be making this move to help provide themselves with more scale to be able to negotiate for cheaper prices on prescription drugs. They will have to do something like this if they hope to compete with the likes of Amazon. Amazon has been seen to be entering the prescription drug market as well. They have received the proper licenses to begin to sell generic drugs in the market, so it seems like only a matter of time before they offer such things via their website.
This deal is known as a horizontal acquisition in that CVS is purchasing a company that is down the food chain from its supply chain so to speak. It is not the same as a vertical acquisition which is the purchase of a direct competitor. Those vertical acquisitions tend to get a lot more review from regulators who are concerned with anti-trust matters. They do not like to see companies snapping up direct competitors as this lowers the overall amount of competition in the market in general. This purchase was not something that regulators felt the need to step in and deal with. They approved it, and the process is moving forward. It may be the best thing that CVS could have done for themselves at this moment in time.