CVS Health will acquire Target's pharmacy and clinic network in a $1.9 billion deal. This is the company's second acquisition in recent weeks. Shartia Brantley reports.
The nation's second largest drugstore chain, CVS, will acquire Target's pharmacy and clinics businesses in a $1.9 billion deal. This is on the heels of a $10 billion deal to buy prescription services provider Omnicare. Deutsche Bank's George Hill says the deal makes good strategic sense, but is concerned about CVS' debtload. SOUNDBITE: GEORGE HILL, EQUITY RESEARCH ANALYST, DEUTSCHE BANK (ENGLISH) SAYING: "CVS is taking on a considerable amount of debt to finance the Omnicare acquisition, and is taking on additional debt to finance the acquisition of the Target stores and clinics. So, perhaps, a little surprised by the timing perspective." CVS will expand geographically to major markets such as Seattle, Washington and Portland, Oregon by acquiring more than 1,600 Target pharmacies. SOUNDBITE: GEORGE HILL, EQUITY RESEARCH ANALYST, DEUTSCHE BANK (ENGLISH) SAYING: "When you're a retail pharmacy organization trying to negotiate reimbursement contracts with payers, that ability to provide a national network of stores to provide access to patients to access the drug benefit, is a key factor. Cannibalization of sales of non-pharmacy products is not a concern and both companies are expected to benefit from the partnership. SOUNDBITE: GEORGE HILL, EQUITY RESEARCH ANALYST, DEUTSCHE BANK (ENGLISH) SAYING: "We suspect, CVS and the combination of Target, they wind up being a net share gainer. You're gonna see more scripts flow into CVS, whether they be CVS retail locations or whether they be Target locations, and Target is also going to benefit as these patients tend to walk into these stores to have prescriptions filled at Target, they're going to buy more stuff on the front end. We would expect to see basket sizes or total revenue at Target increase as well" The sale is Target's latest step in divesting some of its non-core assets. The deal is expected to be completed by the end of 2015.