Healthcare companies like CVS have expanded beyond healthcare and pharmacy benefit management with acquisitions of physician groups and surgical centers in recent years.
“We were very clear about what we were looking for in the expansion of our health services, whether primary care, provider empowerment or the home, and Signify Health clearly ticks two boxes: the home and provider empowerment,” Karen Lynch, CEO of CVS, said in an interview.
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 patients’ health and social needs.
CVS expects the transaction 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 as well as about $400 million in stock appreciation rights.
Mr Lynch said the companies would work with regulators who review transactions 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 lowering health care costs has been an important strategic mission for the Biden administration.
SIGNIFICANT HEALTH
Signify Health serves two groups of customers: about 50 US health insurance plans, including the Aetna division of CVS and rivals such as UnitedHealth Group Inc and provider groups. UnitedHealth and Amazon Inc. are among the companies that were 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 offers 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. The visits combine 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 going public and announced a restructuring earlier this summer. Discussions about the sales process were first reported in August.
CVS said in a statement that the company is “increasingly confident” that it can achieve its long-term earnings goals. As reported in December 2021, this includes high single digit annual growth in 2023 and low double digit annual growth in 2024.
New Mountain Capital, which owns 60% of Signify Health, said it plans to vote in favor of the deal. CVS and Signify Health said their respective boards of directors had approved the transactions.
CVS was advised by BofA Securities of Bank of America and Signify Health by Goldman Sachs and Deutsche Bank.