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Our Take: 12.3.18: Special Issue: M&A Update

Dec 03, 2018

Special Issue: M&A Update:

As the end of the year approaches, we’re seeing a flurry of M&A activity. Here’s a rundown of what has happened in the last couple of weeks.

The biggest news is that CVS Health completed its acquisition of Aetna last Wednesday in a deal that valued Aetna at $212 per share, or approximately $70 billion, not including debt. CVS said in a press statement that Aetna will operate as a stand-alone business and will be led by its current management team. Health insurance products will continue to be marketed with the Aetna brand name. Under an agreement with the Department of Justice, Aetna will divest its stand-alone Medicare Part D prescription drug plans to a subsidiary of WellCare Health; that transaction is expected to close right away.

The merger between Brentwood, Tenn.-based LifePoint Health and RCCH HealthCare Partners has also been completed. The combined company, which will operate under the LifePoint Health name, has regional health systems, physician practices, outpatient care centers and post-acute facilities in more than 85 non-urban communities across the U.S., according to corporate release. It is privately held by Apollo Global Management, and David Dill is the new CEO. The merger is valued at $5.6 billion, including approximately $2.9 billion in debt. LifePoint’s shareholders will receive $65 per share of common stock.

Meanwhile, several mega-mergers besides the CVS-Aetna deal are edging closer to completion. The merger between Cigna and Express Scripts is still being reviewed by regulators in California, New York and New Jersey, leading the two companies to extend the Dec. 8 deadline for their $67 billion merger to June 8, 2019, in a filing with the Securities and Exchange Commission. The companies noted in the filing that they anticipate being able to close the transaction before the end of 2018.

California’s attorney general approved the $28 billion merger between Dignity Health and Catholic Health Initiatives (CHI), but the approval comes with conditions. The combined entity, to be known as CommonSpirit Health, will be required to maintain emergency services and women’s health services for a decade and will also be required to create and invest $20 million in a coordinated care program for homeless patients. The California approval was the last of the state, federal and Catholic regulatory approvals needed for the Dignity Health-CHI merger to proceed, and the deal appears to be on track to close by the end of this year.

In Massachusetts, Beth Israel Deaconess Medical Center and Lahey Health received approval from the state’s attorney general to proceed with their merger—also with certain conditions, including a seven-year price cap, participation in MassHealth, and an investment of more than $70 million to support low-income and underserved communities.

In other news out of Massachusetts, Partners HealthCare tabled its merger plans with insurer Harvard Pilgrim Health Care. Dr. David Torchiana, CEO of Partners HealthCare, told The Boston Glob that the negotiations were becoming too complicated and said the merger would be subject to “intense scrutiny” by state regulators, though he did not rule out the possibility of a future transaction. Partners’ acquisition of Care New England Health System, based in Providence, R.I., is still pending regulatory approval. Partners ended discussions in late October with Lifespan, also based in Providence.

There were a few new acquisition announcements as well, including UnitedHealth Group’s agreement to acquire a controlling stake in The Polyclinic, a 210-physician group based in Seattle. Founded over a century ago, The Polyclinic grew into one of the largest physician-owned multispecialty groups in the country. It will now “align” with UnitedHealth subsidiary OptumCare, according to a blog post on the group’s website. The agreement is subject to closing requirements, including approval by the Federal Trade Commission. Financial terms were not disclosed.

Last in our list of M&A news, medical device maker Boston Scientific signed an agreement to purchase BTG Plc., a British firm, for $4.2 billion in cash. In a press statement, Boston Scientific said BTG develops products used in “minimally invasive procedures targeting cancer and vascular diseases, as well as acute care pharmaceuticals.” The transaction has been approved by the boards of both companies and is expected to close by mid-2019, pending regulatory approvals.
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