CVS Health Corporation Acquires Oak Street Health
Enterprise Value of $10.6 Billion
CVS Health Corporation is making a deeper push into primary patient care with its acquisition of Oak Street Health Inc. The drugstore chain will pay $39 a share in cash for the company, valued at $9.47 billion in equity. The deal will be funded through available resources and financing and is expected to close this year.
Expanding into Direct Patient Care
CVS has been expanding into direct patient care through acquisitions, with the acquisition of Signify Health Inc. expected to be completed in the first half of this year. CVS Health Corporation aims to make healthcare more convenient and affordable for consumers and may partner with doctors or acquire primary-care practices.
Chief Executive Officer’s Largest Deal
The acquisition of Oak Street Health is CEO Karen Lynch’s largest since the $68 billion purchase of insurer Aetna in 2018. CVS also held talks to buy Cano Health Inc. last year.
Oak Street Health’s Mission
Oak Street Health aims to reinvent Medicare care for low-income Medicare patients with chronic health problems. The company went public in 2020 and had 169 centers providing care to over 159,000 patients at the end of last year.
Involvement of Private Equity Firms and Financial Advisors
Private equity firms General Atlantic and Newlight Partners collectively own 39% of Oak Street. Credit Suisse Securities and Lazard Ltd. are serving as co-financial advisors to CVS on the deal, with Centerview Partners advising Oak Street.
CVS Health Corporation Strong Financial Performance
CVS reported adjusted earnings of $1.99 a share for the fourth quarter, exceeding analyst expectations, with revenue of $83.8 billion. The company’s retail sales beat estimates at $28.2 billion, helped by increased prescriptions and front-store volume. Sales in the company’s health-insurance unit also exceeded expectations at $23.03 billion, with a medical benefit ratio of 86%. CVS is targeting adjusted earnings per share of $9 in 2024 and $10 in 2025.