CVS digs into primary care with $9.5B Oak Street Health deal

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CVS digs into primary care with $9.5B Oak Street Health deal

Feb 8 (Reuters) – CVS Health Corp. (CVS.N) will buy Oak Street Health Inc. (OSH.N) for about $9.5 billion in cash, joining rivals in adding primary care to its portfolio as pressure mounts on its health insurance unit.

The deal, CVS’ third largest in the last decade, echoes moves by rivals Walgreens Boots Alliance (WBA.O), Cigna (CI.N) and technology giant Amazon (AMZN.O), as focus on healthcare, especially primary and urgent care delivery, increased since the COVID-19 pandemic.

CVS had been in the market for a medical services acquisition since last year and now with the Oak Street deal, it will control more than 160 primary care centers that offer routine health screenings and diagnosis to older adults.

The deal comes at a time when CVS’ health insurance unit is facing challenges from lower ratings on its Medicare Advantage insurance plans and the end of a major pharmacy benefit management contract.

In September, CVS also agreed to buy home healthcare services company Signify Health in an $8 billion deal, which has been under a tough antitrust review. Signify conducts home assessments, mostly for patients enrolled in Medicare.

CVS now has its “work cut out”, said Evercore analyst Elizabeth Anderson, as the company seeks to get regulatory approval for two deals.

Anderson said the Oak Street deal had a nearly 80% chance of approval.

CVS, which also operates a pharmacy benefits manager, said on Wednesday the value of the Oak Street deal was $10.6 billion, including debt. Its per share offer of $39 represents a nearly 16% premium to Tuesday’s close. Shares of the primary care firm rose 5% before the bell.

The pharmacy giant separately reported a profit of $1.99 per share, above estimates of $1.92 for the fourth quarter, sending its shares over 3% before the bell.

CVS also reaffirmed its 2023 profit outlook of $8.70-$8.90 per share.

Reporting by Bhanvi Satija and Raghav Mahobe in Bengaluru; Editing by Shinjini Ganguli

Our Standards: The Thomson Reuters Trust Principles.

Source: Reuters