CVS Health Corp. is in talks to buy Aetna Inc., according to people familiar with the matter, in a deal that could value the health insurer at upward of $66 billion.
CVS Health has made a proposal to buy Aetna for more than $200 per share, one of the people said. On Thursday afternoon, before The Wall Street Journal reported news of the talks, shares of Aetna were trading at $160.62 each.
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Aetna shares initially shot up more than 10% on the report, giving it a market value of some $58 billion.
If a deal were to be struck, it would rank as the year's largest. Year to date, global M&A volume is down 8% at $2.6 trillion, according to Dealogic, amid uncertainty in Washington. Megamergers have been rare.
In 2015, Aetna agreed to buy rival insurer Humana Inc. for $34 billion, but the deal fell apart amid regulatory opposition.
The talks have been going on for about six months and the companies' respective chief executives -- Larry Merlo at CVS and Mark Bertolini at Aetna -- have met multiple times, one of the people said.
The approach by CVS, a powerhouse in drug retail, underscores the increasingly close ties between health coverage and pharmacy benefits, as the cost and complexity of specialty medications has continued to rise.
Aetna and CVS had already been long-term partners, signing a contract in 2010 for CVS to provide pharmacy-benefit services to the insurer.
Retailers also been on the defensive as more shoppers move to buy everyday staples online. Drugstores also aren't immune to the trend, with Amazon.com Inc. signaling that it will enter the pharmaceutical business.
Shares of pharmacy companies tumbled Thursday after a report that Amazon has received approval from at least a dozen states to become a wholesale pharmacy distributor. The St. Louis Dispatch reported that pharmaceutical boards in at least 12 states have given the e-commerce giant approval for wholesale pharmacy licenses.
CVS shares had been down by about 5% Thursday before they rallied on the possibility of a deal with Aetna to close at $73.31, down 2.9%.
With Aetna, CVS could lock in a huge volume of new members for its pharmacy-benefit management arm, as well as customers for its drugstores. That could bolster its leverage in negotiations with drugmakers, while its oversight of health insurance could improve its ability to strike new deals that tie drug prices to patient outcomes.
A deal for Aetna would advance efforts that CVS has been making to move further into health care, with services including urgent-care clinics, and could enable it to pitch a unified, seamless benefits offering to clients such as big employers. The combined behemoth would also have a huge and diversified store of health data, a huge asset in today's environment.
In buying Aetna, CVS would also evolve more in the direction of UnitedHealth Group Inc., the parent of both the biggest U.S. health insurer and a health-services arm known as Optum, which includes a PBM and a growing number of clinics and physician practices.
But the deal also would set up a potentially challenging dynamic with another insurer, Anthem Inc., which recently announced that it would set up its own PBM, which will be serviced by CVS. That move is set to take place in 2020.
For Aetna, the deal would mean a major change in direction after the foundering of its effort to buy Humana. Though Aetna has said it retains strong pathways to growth, including potential deals and expansion of its Medicare and Medicaid businesses, none appears to hold the turbocharged potential that it had highlighted in its effort to combine with Humana. CVS, for its part, is already a major player in offering Medicare drug plans.
This year, Walgreens Boots Alliance Inc. ended its agreement to buy all of Rite Aid Corp. for $9.4 billion amid antitrust resistance. Walgreens is now seeking to buy half the company's stores.
--Chelsey Dulaney contributed to this article.
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(END) Dow Jones Newswires
October 26, 2017 17:23 ET (21:23 GMT)