NEW YORK (Reuters) – CVS Health Corp agreed on Monday to buy home healthcare services company Signify Health for about $8 billion in cash, a move that will allow one of the largest U.S. healthcare companies to provide further management care for patients in their homes.
Health care companies like CVS have expanded beyond health benefits management and pharmacy with acquisitions of physician groups and surgery centers in recent years.
“We’ve been very clear about what we’ve been looking for in expanding our health services, whether it’s primary care, provider activation or at home, and Signify Health clearly checks two boxes: at home and provider activation,” CVS said in an interview. its CEO Karen Lynch.
Signify Health brings CVS, which manages pharmacies, pharmacy 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 deal to close in the first half of 2023 and said it expects the acquisition to be “materially” 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 stock appreciation rights.
Lynch said the companies will cooperate with regulators reviewing the deals for any antitrust issues.
“We’re not competitors. We don’t have overlapping functions,” Lynch said.
Major mergers and acquisitions have come under intense antitrust scrutiny, and lowering health care costs has been a major strategic mission for the Biden administration.
IT MEANS HEALTH
Signify Health serves two sets of customers: about 50 U.S. health insurance plans, including CVS’s Aetna division, and competitors such as UnitedHealth Group Inc and provider groups. UnitedHealth and Amazon Inc. are among the companies interested in Signify, a source familiar with the discussions told Reuters.
Signify mostly serves the companies and providers associated with Medicare Advantage health plans, in which private insurers provide health benefits paid for by the government to people age 65 and older. It also serves Medicaid plans for people with low incomes.
The company said it expects to serve 2.5 million people through annual in-person and virtual health assessments. The visits are combined with technology and analytics to coordinate care monitoring and social services with the goal of improving the health of underserved populations and reducing health costs, Signify said.
Signify Health CEO Kyle Armbrester, who will remain head of 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. Discussions about the sale process were first reported in August.
CVS said in a statement that the company is “increasingly confident” that it can meet its long-term earnings goals. As outlined in December 2021, this includes high single-digit year-on-year growth in 2023 and low double-digit year-on-year growth in 2024.
New Mountain Capital, which owns 60 percent of Signify Health, said it planned to vote in favor of the deal. CVS and Signify Health said both boards had approved the deals.
CVS was advised by Bank of America’s BofA Securities and Signify Health by Goldman Sachs and Deutsche Bank.
(Reporting by Caroline Humer; Editing by Alistair Bell)