Drugstore chain CVS Health Corp (NYSE: CVS) has entered into an agreement to buy out healthcare platform provider Signify Health Inc (NYSE: SGFY) in an all-cash deal valued at $8 billion. Following the announcement, the stock of CVS Health was trading at $99.41, almost unchanged from its prior close.
Likewise, Signify Health ended Tuesday’s trading session at $28.88, reflecting a gain of 0.5% or $0.12 from the prior trading session. Notably, the stock of Signify Health has gained roughly 45% in the past month, taking its market cap to approximately $6.75 billion. The stock of CVS closed at $98.73, almost flat from its prior close. The shares of Signify ended Tuesday’s trading session at $29.10, up 1.15% or $0.33 from the previous close.
Woonsocket, Rhode Island-based CVS, has stated that it will shell out $30.50 per share for acquiring Signify, a move widely seen as a strategy to strengthen the former’s fast-expanding healthcare business. Notably, Norwalk, Connecticut-based Signify offers a proven analytics platform aiding in-home patient treatment.
Both companies anticipate the completion of the takeover in the first half of 2023, subject to the usual regulatory approvals. New Mountain Capital, a private equity firm, owning roughly 60% of Signify’s shares, has already given its consent for the takeover deal.
In August, The Wall Street Journal carried an article stating that Signify, which got listed last year, was looking at several strategic plans, including an outright sale. Rumors of Amazon being a likely buyer have propelled the stock since late last month. Interestingly, in August, CVS stated that it intends to purchase or acquire a considerable ownership stake in a company focused on primary care before the end of 2022.
The deal is one among a series of acquisitions made by CVS, which operates the largest pharmacy chain in the US, over the last few years. The company completed the acquisition of insurer Aetna in November 2018 and Caremark (pharmacy benefit manager) in 2007. The company also facilitated patients receiving emergency care at MinuteClinic, established within its shops. Of late, CVS has unveiled treatment for mental health at certain stores.
Commenting on the takeover, Karen Lynch, CVS Health President and CEO, said, “This purchase will strengthen our relationship with users in the home and allow service providers to meet patient requirements more efficiently as we pursue our mission to transform the quality of medical care.”
The acquisition news has come against the backdrop of rivals such as Amazon gearing up to make further inroads in the healthcare industry. It can be remembered that back in July, Amazon acquired primary healthcare provider One Medical for roughly $3.90 billion.
The acquisition news is expected to keep the stock price of CVS range-bound with a slight bullish bias in the days ahead.
The historical price chart indicates that the stock of CVS is trading near the support (base of the ascending triangle pattern) level of 98. The next resistance is anticipated only near 102. Additionally, the stochastics RSI indicator is in the bearish zone. Therefore, we anticipate the stock price of CVS to resume its uptrend in the days ahead.
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