CVS buys Signify Health for $8 billion

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The CVS Health logo is seen in this illustration taken May 3, 2022. REUTERS/Dado Ruvic/Illustration

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NEW YORK, Sept 5 (Reuters) – CVS Health Corp (CVS.N) on Monday agreed to buy home health services company Signify Health for around $8 billion in cash, a move that will allow one of America’s largest healthcare companies to provide more care for patients in their homes.

Healthcare companies like CVS have expanded beyond healthcare and pharmacy benefit management with acquisitions of physician groups and surgical centers in recent years.

“We’ve been very clear about what we’re looking for to expand our health services, whether it’s primary care, provider empowerment, or in-home, and Signify Health clearly ticks two boxes: in-home and provider empowerment. providers,” CVS CEO Karen Lynch said in an interview.

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Signify Health brings CVS, which manages pharmacies, drug benefits and Aetna insurance plans, a network of 10,000 clinicians who provide in-home assessments of patient health and social needs.

CVS expects the deal to close in the first half of 2023 and said it expects the acquisition to be “significantly” earnings accretive.

CVS said it would pay $30.50 per share for the company, or about $7.6 billion in equity plus about $400 million in equity appreciation rights.

Lynch said the companies would work with regulators who review deals for any antitrust issues.

“We’re not competitors. We don’t have overlapping roles,” Lynch said.

Major mergers and acquisitions have come under intense antitrust scrutiny, and cutting health care costs has been an important strategic mission for the Biden administration.

MEANS HEALTH

Signify Health serves two groups of customers: approximately 50 US health insurance plans, including the Aetna division of CVS and competitors such as UnitedHealth Group Inc (UNH.N) and provider groups. UnitedHealth and Amazon Inc. (AMZN.O) are among the companies interested in Signify, a source familiar with the talks told Reuters.

Signify primarily serves businesses and providers associated with Medicare Advantage health plans, in which private insurers provide government-paid health benefits to people age 65 and older. It also serves Medicaid plans for low-income people.

The company said it plans to serve 2.5 million people through annual in-person and virtual health assessments. Visits combine with technology and analytics to coordinate follow-up care and social services with the goal of improving the health of underserved populations and reducing healthcare costs, Signify said.

Signify Health CEO Kyle Armbrester, who will continue to lead the division, said the company plans to expand into commercial health plans.

The company, which went public in early 2021, has struggled since its IPO and announced a restructuring earlier this summer. Talks on the sale process were first reported in August.

CVS said in a statement that the company was “increasingly confident” in its ability to meet its long-term earnings targets. As reported in December 2021, this includes high single-digit annual growth in 2023 and low double-digit year-over-year growth in 2024.

New Mountain Capital, which owns 60% of Signify Health, said it plans to vote for the deal. CVS and Signify Health said both boards approved the deals.

CVS was advised by Bank of America’s BofA Securities (BAC.N) and Signify Health by Goldman Sachs (GS.N) and Deutsche Bank (DBKGn.DE).

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Reporting by Caroline Humer Editing by Alistair Bell

Our standards: The Thomson Reuters Trust Principles.

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