The deal is the largest ever in the health business. Rumours that Amazon might enter the drugstore market is believed to have played a role in the CVS bid. The deal needs regulatory approval, and could significantly impact the US healthcare market.

Customers leave a CVS store in Brooklyn New York. CVS on Sunday announced a $93 billon deal to to by health insurer Aetna. December 3, 2017.
Customers leave a CVS store in Brooklyn New York. CVS on Sunday announced a $93 billon deal to to by health insurer Aetna. December 3, 2017. (AP)

US drugstore chain CVS Health announced that it would buy medical insurer Aetna for about $69 billion, in a move that would create a new giant in the healthcare sector.

The deal announced on Sunday would see Aetna shareholders receive $207 per share, with $145 in cash and the rest in newly issued stock. The overall cost of the transaction rises to $77 billion with the assumption of Aetna's debt.

"The transaction is expected to close in the second half of 2018," CVS said in a statement, adding "It is subject to approval by CVS Health and Aetna shareholders, regulatory approvals and other customary closing conditions."

Talks between the two have been reported since late October, and are believed to have been driven by rumours that online shopping behemoth Amazon would enter the drugstore market.

The merger between CVS and Aetna comes amid rising medical costs for many citizens and employers, including prescription medicines, as President Donald Trump vows to undo the Affordable Care Act.

Largest ever

The deal is the largest ever in the health insurance space, a spot previously occupied by Express Scripts' buyout of Medco for $29 billion in 2012.

The acquisition is historic as a combination of a drug store chain with a massive health insurer. CVS operates 9,700 drugstores across the US and Aetna insures 22 million Americans. 

The healthcare industry, meanwhile, is preparing for possible cuts to government-funded programs such as Medicaid as a result of Republican tax cuts to public services.

"Today, increasing numbers of consumers are taking on more and more responsibility for paying for their health care as the burden of costs is being shifted to them," the statement said, adding that by merging, the company would be better placed to help customers manage their costs.

"With the analytics of Aetna and CVS Health's human touch, we will create a healthcare platform built around individuals," said CVS Health President and Chief Executive Officer Larry J. Merlo.

Aetna in February announced it had given up its effort to buy rival Humana following 19 months of negotiations, due to opposition by the US Department of Justice which said it would stifle competition.

The acquisition would be considered a so-called "vertical merger" because the companies operate in non-competing industries.

Analysts have said the CVS-Aetna deal could prompt other healthcare sector mega-mergers, as rivals scramble to emulate the strategy.

Such deals are usually not opposed by the US government but the Department of Justice last month sued to block a merger between telecommunications giant AT&T and entertainment conglomerate Time Warner.

Source: AFP