November 22, 2024
Business

CVS buys Caremark for drug distribution deals

NASHVILLE, Tenn. – Drugstore operator CVS Corp. announced Wednesday it is buying pharmacy benefits manager Caremark Rx Inc. for about $21.2 billion in stock.

The deal, which the companies described as a “merger of equals,” would create a $75 billion drug distribution powerhouse that could compete more effectively for customers and drive a harder bargain with drug makers.

But investors sent shares of both companies lower, and some analysts raised concerns about integrating the two businesses.

CVS shares tumbled $2.32, or 7.4 percent, to close at $29.06 on the New York Stock Exchange while Caremark lost $1.06, or 2.2 percent, to finish at $48.17. Caremark shareholders will be getting CVS stock in the deal.

But SunTrust Robinson Humphrey analyst David Magee wrote in a note to clients that the deal could be seen as too much risk for CVS, which is still digesting acquisitions from the past couple of years, including purchasing the Sav-On drug store chain made earlier this year. He also wrote the deal could distract CVS from developing growth from its existing business lines.

Still, he said he was cautiously optimistic about the long-term implications of the deal because of the size and buying power of the new company.

A.G. Edwards & Sons Inc. analyst Andrew Speller also wrote in a note that he was concerned about whether the companies could be successfully integrated.

Company officials said the deal would create significant benefits for employers and health plans through more effective cost management and new programs, and for consumers through expanded choice and more personalized services.

“Combining Caremark’s expertise in serving employers and health plans with CVS’ expertise in serving consumers will create a powerful force for change in pharmacy services,” said Edwin “Mac” Crawford, Chairman, CEO and President of Caremark, which is based in Nashville.


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