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CVS HEALTH CORPORATION

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CVS-Aetna Deal Gets Nod -- WSJ

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10/11/2018 | 02:48am EST

By Anna Wilde Mathews and Micah Maidenberg

Justice Department antitrust enforcers cleared CVS Health Corp.'s acquisition of Aetna Inc. after the companies took steps to ease regulators' concerns, moving the nearly $70 billion deal a major step closer.

The Wall Street Journal had earlier reported that federal antitrust officials were preparing to give the deal a green light, but the overlap in the two companies' Medicare drug businesses had to be addressed. Aetna in late September announced the planned divestiture of its Medicare drug business to WellCare Health Plans Inc.

In announcing its approval, the Justice Department said that the WellCare deal "would fully resolve the Department's competition concerns."

The merger -- which brings together the giant drugstore chain and pharmacy-benefit manager with the No. 3 health insurer -- needs some state approvals to complete the deal.

State attorneys general from California, Florida, Hawaii, Mississippi and Washington joined the Justice Department in filing a civil suit Wednesday asking the U.S. District Court for the District of Columbia to require the sale to WellCare as a condition of the merger.

CVS said that it already had gotten "many" of the state approvals it needs. "We are pleased to have reached an agreement with the Justice Department that maintains the strategic benefits and value creation potential of our combination with Aetna," said CVS's chief executive, Larry Merlo. "We are now working to complete the remaining state reviews."

Aetna rival Cigna Corp. has already gotten Justice Department antitrust clearance for its acquisition of Express Scripts Holding Co., which also brings together a major health insurer with a pharmacy-benefit manager.

CVS and Aetna operate in largely different businesses, with their most direct overlap coming in selling plans under the Medicare prescription-drug program, known as Part D.

CVS has the largest market share in the Medicare drug-plan business, with around 6.1 million members, according to a recent tally from Wells Fargo. Aetna is the fifth-biggest Part D seller, with around 2.2 million members, according to Wells Fargo.

To preserve competition where CVS and Aetna sell Part D plans head-to-head, the Justice Department had been expected to require the companies to sell off parts of their Part D business to a competitor that would compete with the newly merged firm. WellCare already had around 1.1 million Part D enrollees.

Also on Wednesday, CVS said accounting chief and controller Eva Boratto would become the company's next finance chief. Shawn Guertin, who is now Aetna's CFO, had been expected to take over that role in the combined company. Mr. Guertin, who CVS said was leaving for personal and family reasons, will remain with the company until June 2019 to assist in the Aetna integration.

The company also said it would add three additional Aetna directors -- Edward Ludwig, Fernando Aguirre and Roger Farah -- to its board after the transaction closes. The latest move, including the previously announced plan to add current Aetna Chief Executive Mark Bertolini, would bring the number of people on CVS's board to 16.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AETNA 0.33% 212.7 Delayed Quote.17.91%
CVS HEALTH CORPORATION 2.98% 69.695 Delayed Quote.3.46%
WELLCARE HEALTH PLANS 2.26% 279.895 Delayed Quote.15.93%
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Financials ($)
Sales 2018 194 B
EBIT 2018 10 374 M
Net income 2018 1 899 M
Debt 2018 67 695 M
Yield 2018 2,95%
P/E ratio 2018 37,19
P/E ratio 2019 10,38
EV / Sales 2018 0,80x
EV / Sales 2019 0,60x
Capitalization 87 537 M
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Mean consensus OUTPERFORM
Number of Analysts 26
Average target price 88,6 $
Spread / Average Target 31%
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Managers
NameTitle
Larry J. Merlo President, CEO & Non-Independent Director
David Wyatt Dorman Chairman
Jonathan C. Roberts Chief Operating Officer & Executive Vice President
Eva C. Boratto Chief Financial Officer & Executive Vice President
Troyen A. Brennan Chief Medical Officer & Executive Vice President
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