CVS Health Corp (ticker: CVS) is now one step closer to completing its $69 billion buyout of health insurance giant Aetna ( AET). On Tuesday, more than 97 percent of CVS and Aetna shareholders approved the deal via vote at special shareholders meetings, leaving the deal’s fate in the hands of regulators.
CVS has said the Aetna deal could help lower health care costs by driving patients away from expensive emergency rooms and toward lower-cost drugstore walk-in clinics. CVS management has said it expects its MinuteClinics to be capable of performing 90 percent of the services currently provided by primary care facilities within the next year or so.
CVS and Aetna have also said the deal would help companies negotiate lower drug prices and manage usage for covered employees.
[See: 10 ETFs That Will Keep Your Portfolio in Good Health.]
“It’s the lower overall cost of therapy. It’s not just the drugs. It’s not just the PBM (pharmacy benefit manager). It’s the overall outcome for the patient,” Aetna CEO Mark Bertolini told Reuters in December.
There have been several huge merger deals rumored in the health care sector in recent months as the industry gears up for a new wave of competition. In January, Amazon.com ( AMZN), J.P. Morgan Chase & Co. ( JPM) and Berkshire Hathaway ( BRK.A, BRK.B) announced a new heath care partnership. Last week, Cigna Corp. ( CI) said it intends to acquire pharmacy benefits manager Express Scripts Holding Co. ( ESRX). Walgreens Boots Alliance Inc ( WBA) is also reportedly considering a full buyout of AmerisourceBergen Corp. ( ABC).
Bank of America analyst Michael Cherny says CVS is a top stock pick in the health care sector.
“CVS is a strong cash flow generator that should be able to drive meaningful health care savings once the Aetna deal is complete,” Cherny says.
However, investors can expect some uncertainty in the near-term thanks to Amazon and company.
“We see the most immediate risk from Amazon and e-commerce competition in medical and dental distribution, and e-commerce vendors continue to depress retail front-end margins at CVS and Walgreen’s,” Cherny says.
Now that CVS shareholders have given the deal the thumbs up, the final hurdle for the merger will be regulators. In February, the Department of Justice requested more information about the proposed deal from both companies.
[See: 7 Big Pharma Stocks to Buy for Big Dividends.]
Bank of America has a “buy” rating and $91 price target for CVS stock.
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Shareholders OK Merger of CVS, Aetna originally appeared on usnews.com
