Following recent media reports that the healthcare company CVS Health Corp (NYSE: CVS) is in advanced discussions to acquire home-healthcare provider Signify Health (NASDAQ: SGFY) for roughly $8 billion, two companies confirmed the deal on Monday.
CVS agreed to pay $30.50 for each SGFY share in a deal that values the healthcare business at around $8 billion. The transaction is expected to close in the first half of the next year.
“We’ve been very clear about what we were looking for in expanding our health services, either be it primary care, provider enablement or in the home, and Signify Health clearly checks off two boxes: into the home and provider enablement,” CVS CEO Karen Lynch told Reuters.
The transaction is expected to close in the first half of the next year. Lynch doesn’t expect major regulatory issues.
“We are not competitors. We don’t have any overlapping functions,” he added.
Signify has been looking at different options since the beginning of this summer, including the potential sales to Amazon.com (NASDAQ: AMZN), UnitedHealth Group (NYSE: UNH), and Option Care Health (NASDAQ: OPCH).
UnitedHealth has reportedly made an offer worth $30 per share, although it is still unknown whether that price was only suggested or officially placed on the table to Signify shareholders.
The SGFY situation this the first time both UnitedHealth and Amazon had struggled with acquisitions of other healthcare companies. UnitedHealth is battling in court to go through with its intended acquisition of Change Healthcare (NASDAQ: CHNG) after the Justice Department filed a lawsuit to halt the transaction on the grounds that it would give the business access to private information on competing health insurers.
On the other hand, Amazon just decided to buy primary-care clinic startup One Medical (NASDAQ: ONEM), but the deal is closely looked at by US regulators regarding rising worries about rivalry in technology and healthcare.
The Wall Street Journal was the first to break the news of private discussions between CVS and Signify, sending Signify’s stocks up by 6.7% immediately after the news broke out. This marked an overall increase of 41% in Signify’s stock price to $29.88 in New York, the largest intraday gain since the firm started trading in early 2021 and the first time price rose above the IPO price.
Dealing with Signify is a logical move for CVS because it might enhance treatment and save costs by ensuring that patients receive the support they require following medical operations to avoid additional hospitalizations.
CVS Health is focused on achieving its long-term business goals, including a high single-digit year-over year growth in 2023 and a low double-digit year-over-year growth in 2024. The pharmacy giant said it is “increasingly confident” it will hit these targets.
Signify provides technology and data for the purpose of assisting with patient at-home care.
It also provides software that allows insurers including health plans, government programs, and employers to easily transition to value-based payment systems.
A prominent investor in Signify is the New York-based private equity firm New Mountain Capital, which acquired a stake in the company in 2017. Shareholders of the company voted in favor of the sale to CVS Health. Signify will operate as a business unit within CVS Health.
CVS has a market cap of over $130 billion based on Friday’s closing price.
Summary
Pharmacy chain CVS Health announced on Monday it has agreed to acquire Signify Health in an $8 billion deal. It was rumored earlier that both Amazon and UnitedHealth were in the running for Signify, which was open to a sale.
