CVS Health Corp (CVS.N) on Monday agreed to buy home healthcare services company Signify Health for about $8 billion in cash, a move that will enable one of the largest U.S. healthcare companies to provide further care management to patients in their homes.
Healthcare companies like CVS have been expanding beyond managing health and pharmacy benefits with acquisitions of doctors groups and surgical centers in recent years.
“We’ve been very clear about what we were looking for in expanding our health services, either be it primary care, provider enablement or in the home, and Signify Health clearly checks off two boxes: into the home and provider enablement,” CVS CEO Karen Lynch said in an interview.
Signify Health brings CVS, which runs pharmacies, pharmacy benefits and the Aetna insurance plans, a network of 10,000 clinicians who provide home-based assessments of patient health and social needs.
CVS expects the deal to close in the first half of 2023 and said that it expects the acquisition to be “meaningfully” accretive to earnings.
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 equity appreciation rights.
Lynch said the companies would work with regulators who review deals for any antitrust issues.
“We are not competitors. We don’t have any overlapping functions,” Lynch said.
Large mergers and acquisitions have come under intense antitrust scrutiny and lowering healthcare costs has been an important strategic mission for the Biden Administration.
Signify Health serves two groups of customers: about 50 U.S. health insurance plans including CVS’ Aetna division and rivals such as UnitedHealth Group Inc (UNH.N) and groups of providers. UnitedHealth and Amazon Inc. (AMZN.O) are among companies that were interested in Signify, a source familiar with the discussions previously told Reuters.
Signify mostly serves the companies and providers associated with Medicare Advantage health plans, in which private insurers provide government-paid health benefits to people aged 65 and older. It also services Medicaid plans for people with low incomes.
The company said it expects to service 2.5 million people through annual in-person and virtual health assessments. The visits combine with technology and analytics to coordinate follow up care and social services with the goal of improving health of underserved populations and lowering health costs, Signify said.
Signify Health CEO Kyle Armbrester, who will remain as the head of the division, said the company plans to expand to commercial health plans.
The company, which went public in early 2021, has struggled since its stock market launch and had announced a restructuring earlier this summer. Talks of the sale process were first reported in August.
CVS said in a statement that the company is “increasingly confident” it can achieve its long-term earnings goals. As outlined in December of 2021, that includes high single-digit year-over year growth in 2023 and low double-digit year-over-year growth in 2024.
New Mountain Capital, which owns 60% of Signify Health, said that it planned to vote for the deal. CVS and Signify Health said both boards of directors had 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).