It was announced yesterday that CVS Health (NYSE: ) agreed to pay $30.50 per share in cash to acquire So health (NYSE: ).
The deal was valued at $8 billion in total, and CVS said it would finance the deal with existing cash on its balance sheet.
“Signify Health will play a critical role in advancing our healthcare strategy and provides us with a platform to accelerate our growth in value-based care,” said CVS Health President and CEO Karen C. Lynch.
CVS Health and Signify Health expect the transaction to close in the first half of 2023.
“This is an important step as we continue to execute on our strategy,” added CVS Health Executive Vice President and Chief Financial Officer Sean Guertin.
“We expect the acquisition to be materially accretive to earnings and, as a result, we are increasingly confident that we will be able to achieve our long-term adjusted earnings per share targets as outlined at our December 2021 Investor Day.”
Following the news, an analyst at JPMorgan downgraded SGFY to Neutral from Overweight.
“Signify is an attractive asset given its growth profile and access to the homes of approximately 80 million members enrolled in Medicare Advantage and Medicaid managed care, however we note that 37% of revenue combined comes from Humana & Optum (Top 10 customers = 78%), which could potentially be at risk if SFGY is taken over by a competitor, despite the company saying it will be run as a separate payer independent business,” the analyst wrote in a note to a client.
A Credit Suisse analyst believes the SGFY deal is “at least one part of the company’s overall strategy, but will still leave open the question of adding primary care.”
As such, the analyst says CVS Health is likely to “pursue more mergers and acquisitions, as suggested by management in our virtual visit to headquarters.”
Shares of CVS Health rose 0.5% in premarket trading Tuesday.