CVS, Aetna Merger Raises Questions About Future In Hartford

Dec. 05--Two years ago, the CEOs of CVS Health Corp. and Aetna Inc. -- Larry Merlo and Mark Bertolini -- dined together at Peppercorn's in downtown Hartford when the idea of a deeper collaboration first surfaced.

Hartford-based Aetna was in the midst of what would be an ill-fated bid for rival insurer Humana, Bertolini recalled in an interview on CNBC Monday. But those talks over dinner would later gain traction leading to Sunday's announcement that CVS would acquire Aetna in a $69 billion takeover.

If approved, the deal also would spell the end of independence for Aetna -- founded 164 years ago in Hartford -- and raise questions about the health insurer's future corporate presence in the city and the jobs of 4,000 Aetna workers. Aetna has a total of about 6,000 employees in Connecticut.

On a conference call Monday with investors, Bertolini and Merlo made no mention of Hartford or employment, except to note that some of the $750 million in merger "synergies" were expected to be the elimination of "redundant" corporate functions.

Some experts said Hartford may not fare badly because of plans to operate Aetna as a separate unit under the CVS corporate umbrella.

David Souder, associate dean for graduate programs at the University of Connecticut School of Business, said the two companies -- Aetna in health insurance and CVS Health, in pharmacy benefits -- don't overlap.

"Most of the time, you have to leave autonomy in both predecessor companies because they are very different," said Souder, who has published research on mergers and acquisitions. "So, it's not like merging two banks. They are two different businesses so you leave them alone, at least in the beginning."

Souder added: "We see when people try to structurally integrate more than that, it doesn't work very well."

Oz Griebel, president and CEO of the MetroHartford Alliance, the region's chamber of commerce, said the state and the city of Hartford has to be ready to be competitive for every job in the city.

"When they go through their rationalization of jobs, we want to make sure that Hartford and the state of Connecticut are very much at the top of their list," Griebel said.

Griebel said the combination of the two companies represents an intriguing combination -- a strategic acquisition and not one driven by cost-cutting -- and one focused on growing the merged businesses.

"What does that mean long term?" Griebel said. "We're hopeful we can have those conversations as this transaction comes together."

Aetna has signaled to Hartford Mayor Luke Bronin that the health insurer remains committed to "being a part of a comprehensive, sustainable solution to Hartford's fiscal challenges." Aetna -- along with Travelers and The Hartford -- pledged a combined $50 million to the city, $10 million in each of the next five years.

"I don't think we know yet the particulars of how this will affect Aetna or CVS, but I strongly believe that we need to treat this as an opportunity to build a relationship with a global health care company that's headquartered right here in New England," Bronin said Monday.

At Aetna's Farmington Avenue headquarters on Monday, workers attended an all-employee meeting with Bertolini in the afternoon. Those interviewed beforehand outside declined to identify themselves, but were not worried about their jobs -- at least for now.

The sale of Aetna comes just six months after the insurer announced it would relocate its headquarters from Hartford to New York City. State officials have said the sale could reopen talks about reversing that decision.

Aetna has a storied, intermingled history with Hartford, once key to the city claim to being the "Insurance Capital of the World." In the 1950s and 1960s, Aetna's leaders were part of the so-called corporate "bishops" which influenced development in Hartford and philanthropic pursuits.

"Mother Aetna" was helping to reshape downtown into the 1980s -- both with human capital and deep pockets -- helping to finance the Hartford Civic Center, now renamed the XL Center, and later, CityPlace I, the state's tallest building.

Aetna's merger with U.S. Healthcare in 1996 marked the beginning of the insurer's transformation into a health services company with a global reach. Aetna remains a key player in philanthropy in Hartford and Connecticut, but how that might change with the merger isn't yet known.

"It is a different era now," said Tyler Smith, a Hartford architect and son of the late Olcott Smith, the longtime Aetna chairman. "That was an era when corporations weren't global or international and did define, to some degree, their persona in terms of their civic engagement in the city where they were based."

Courant staff writers Ken Byron and Jenna Carlesso contributed to this story.

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