CVS and Aetna merger reaches final approval

The two healthcare providers have cleared the final hurdle before their merger.

Medicine bottles
Source: Bloomberg

CVS Health and Aetna are one step closer to completing their massive merger. The US state of New York approved the joining of the two companies, paving the way for the corporations to provide more healthcare to US consumers. The stocks of both businesses jumped after the final approval.

CVS and Aetna want to change US healthcare

CVS is the largest retail pharmacy in the US, while Aetna is one of the biggest insurance companies. In 2017, they announced a $69 billion merger. CVS' acquisition of Aetna is part of the corporations’ bid to become the largest health provider in the US. The businesses want to combine healthcare services and give customers easy access to insurance and medications in pharmacies. While the US Department of Justice approved the union, each state’s regulators still had to say yes to the deal.

Concerns about merger

Many US states expressed concerns that the merger would create a healthcare monopoly. Regulators feared that the two companies would increase customer premiums. As a condition for approval in the US state of California, CVS and Aetna promised to minimize rate hikes and drug costs low.

The corporations also pledged to invest $240 million in the state’s department of health. The New York Department of Financial Services (DFS) made similar demands and the two corporations agreed. Financial Services Superintendent, Maria Vullo, explained why she granted approval to the merger.

‘DFS listened to the concerns of the public and has obtained significant commitments from CVS and Aetna to address those concerns, ensuring that the companies hold to their promises of reduced costs and improved healthcare for New Yorkers, not pass on the costs of this acquisition to New Yorkers, enhance data privacy, and not act in an anti-competitive manner going forward, ‘ said Vullo.

Next steps for CVS and Aetna

CVS and Aetna are expected to make the merger official by the end of the week. The deal is expected to be the largest US insurance acquisition in history.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by writer