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CVS forks out $8B for Signify Health

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Illustration: Gabriella Turrisi/Axios

CVS Health has agreed to acquire Dallas value-based care enabler Signify Health for approximately $8 billion.

Why it's the BFD: After losing out on One Medical to Amazon and watching Walgreens make bets on VillageMD and CareCentrix, CVS has finally gained a major foothold in health care delivery.

Zoom in: CVS has been outspoken about its intent to move closer to the patient, away from its historical roots. Signify moves CVS away from the pharmacy — and into the home.

  • Through the deal, CVS gains access to 10,000-plus clinicians nationwide that provide health and wellness visits to nearly 2.5 million patients in the home.

Yes, and: Buying Signify isn't a "one and done" strategic move — but a starting point for its bigger care delivery ambitions, which will likely involve more M&A, CVS executives hinted on a Tuesday morning earnings call.

  • Signify checks two boxes — home health and provider enablement — and is complementary to the third box CVS reiterated it plans to enter: primary care. (Also, unlike One Medical, it's a profitable starting point.)
  • "The value-based care capabilities this brings us is where a lot of the power is for the long haul," CEO Karen Lynch told investors.

What they're saying: Analysts have been quick to chime in with takes on the deal ranging from positive (BTIG) to puzzled (Cowen).

  • "The deal with CVS makes sense," wrote BTIG analysts David Larsen and Aron Corin in a Tuesday note, saying it can help CVS "build a crucial care coordination and home-care solution and support Signify in retail, specialty and pharmacy services."
  • Cowen analysts Charles Rhyee and Steven Braun weren't quite as convinced: "While we are encouraged to see CVS make an acquisition ... we believe investors will look for clarity on key topics including client retention, potential deal synergies and how Signify will integrate into CVS's move to care delivery."

How it works: Signify helps health systems and health plans move to value-based care arrangements by creating risk contracts where it shares in both upside and downside risk.

Details: CVS on Monday agreed to acquire Signify for $30.50 per share.

  • New Mountain Capital, which owns a 60% stake in Signify Health, agreed to vote in favor of the transaction.
  • CEO Kyle Armbrester will continue to lead Signify as part of CVS.
  • BAML advised CVS, while Goldman Sachs and Deutsche Bank, as first reported by Axios, are advising Signify.

Context: This is the pharmacy retailer's largest M&A move in health care since buying Aetna in a $69 billion deal completed in 2018.

  • It scooped up Caremark RX for around $27 billion in 2007.
  • CVS was the runner-up for One Medical, which went to Amazon for $4 billion in July.

Of note: CVS is also seeking a buyer for BSwift, the benefits technology business it acquired eight years ago, Axios reported last week.

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