Report: Aetna Board Approves Sale Of Hartford Insurance Giant To CVS

Dec. 03--Aetna Inc's board of directors Sunday approved a $69 billion sale of the Hartford health insurance giant to CVS Health Corp., according to Reuters, citing unidentified people familiar with the matter.

The mega-deal -- one of the largest ever in the health care industry -- is valued at $207 per share, mostly in cash, Reuters reported. The deal is expected to be announced later Sunday

The Wall Street Journal also reported early Sunday afternoon that Aetna shareholders will receive $145 a share in cash and $62 in stock.

If approved the CVS purchase of Aetna would be the largest corporate acquisition of the year.

Representatives of the two companies did not immediately respond to requests for comment.

Observers say the deal is dramatic evidence that both companies see competitive threats on multiple fronts in the health care industry. Online behemoth Amazon is pushing to get into the pharmacy business. A formidable competitor, UnitedHealth Group, the nation's largest health insurer, already has a well-established pharmacy benefits business. And health insurer Anthem is starting a pharmacy benefits unit of its own.

John Rowe, who was chief executive officer of Aetna from 2000 to 2006, said in an interview Sunday that other reasons could explain the tie-up. Aetna has a "good long-standing relationship" with the pharmacy business of CVS. With the renewal of its contract for pharmacy work, "that obviously started conversations about what comes next," he said.

Rowe also cited a personal connection between the two companies. Troy Brennan, executive vice president and chief medical officer of CVS Health, had been hired by Rowe as chief medical officer of Aetna.

He credited Brennan for changes at CVS such as mini clinics and the discontinuation of the sale of tobacco products. "He's a very visionary guy," Rowe said.

When he left for CVS, Rowe said he believes he took with him "an affection for Aetna and personal relationships."

Rowe does not believe Aetna will disappear into CVS.

"The Aetna brand is very, very strong," he said. "CVS is smart enough that it will want to keep that brand in the payer space. Even though it's an acquisition, it would be prudent on the part of CVS people to maintain Aetna as a brand."

In addition, with three Aetna members on the CVS board and a 22 percent ownership of CVS by Aetna shareholders, Aetna will play a role running CVS, Rowe said.

In Hartford, the business community Sunday viewed the merger as one prompted by the sweeping changes in health care, marked by the consolidation of segments of the business that have long been separate.

"We are hopeful that this is going to strengthen Aetna overall through this partnership," Joe Brennan, president and chief executive of the Connecticut Business & Industry Association, said.

As for employment that stands at 6,000 in Connecticut and 4,000 in Hartford, Brennan said he hopes that CVS' headquarters in nearby Rhode Island will mean Hartford will remain a strong employment base for the city -- and one that will grow under the merged company.

Aetna announced in June it will move its headquarters to New York City from Hartford, where it has been based since 1853. As speculation mounted over the past month about a possible merger, some economic development officials in Connecticut said there might be a chance to reopen discussions on the relocation.

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UPDATES:

This story was updated at 3:42 p.m. on Dec. 3, 2017 with comments on the deal.

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