CVS strikes $9.5bn Oak Street Health deal

BY Richard Summerfield

CVS Health Corp has agreed to acquire Oak Street Health Inc in an all-cash transaction valued at $9.5bn. The deal will allow CVS to offer routine health screenings and diagnosis to older adults.

The deal will see CVS acquire all the outstanding shares of Oak Street at $39 per share, representing an enterprise value of approximately $10.6bn. The agreed price represents a nearly 16 percent premium to Oak Street Health’s closing price last Tuesday. The parties anticipate that the deal will close in 2023.

CVS Health expects to fund the transaction through available resources and existing financing capacity. The transaction has been approved by the board of directors at each of the respective companies and is subject to approval by a majority of Oak Street Health’s stockholders, regulatory approval and satisfaction of other customary closing conditions. Private equity funds affiliated with Newlight Partners LP and General Atlantic LLC and certain members of the Oak Street Health board of directors, which collectively own approximately 45 percent of the common stock of Oak Street Health, have agreed to vote the shares they own in favour of the transaction, subject to customary exceptions.

“Combining Oak Street Health’s platform with CVS Health’s unmatched reach will create the premier value-based primary care solution,” said Karen S. Lynch, health president and chief executive of CVS. “Enhancing our value-based offerings is core to our strategy as we continue to redefine how people access and experience care that is more affordable, convenient and connected.”

“This agreement with CVS Health will accelerate our ability to deliver on our mission and continue improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders,” said Mike Pykosz, chief executive of Oak Street Health. “Together with CVS Health, we will have access to greater resources and capabilities to expand the reach of our platform, provide more opportunities for our teammates and, most importantly, make a meaningful difference in the lives of the patients we serve.”

“Oak Street Health is a premier value-based primary care platform,” said Shawn M. Guertin, chief financial officer of CVS Health. “We believe that in partnership with CVS Health, Oak Street Health can accelerate its growth and provide an attractive return to our shareholders over time. The pending acquisitions of Oak Street Health and Signify Health will also meaningfully advance our goal of adding 200 basis points of long-term adjusted operating income growth, a key commitment we made to shareholders at our December 2021 Investor Day.”

The deal, CVS’ third largest in the last decade, echoes moves by rivals Walgreens Boots Alliance, Cigna and tech giant Amazon, all of which expanded their healthcare offerings, especially primary and urgent care delivery, during the coronavirus (COVID-19) pandemic. Oak Street Health has approximately 600 primary care providers and 169 medical centres across 21 states in the US.

News: CVS digs into primary care with $9.5 bln Oak Street Health deal

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