CVS Health Agrees to Take Over Target Pharmacies, Clinics in $1.9B Deal

WOONSOCKET, R.I. AND MINNEAPOLIS — CVS Health Corp. (NYSE: CVS) has agreed to acquire Target’s (NYSE: TGT) pharmacy and clinic businesses for about $1.9 billion. The acquisition includes more than 1,660 pharmacies throughout 47 states. They will operate as a “store-within-a-store” format, and will be rebranded as CVS/pharmacy.

The purchase also includes Target’s 80 in-store health clinics, which will now fall under the CVS MinuteClinic flag. CVS also plans to open 20 new clinics inside Target stores within three years of this transaction closing. This acquisition helps CVS realize its goal of operating 1,500 clinics by 2017.

CVS Health and Target also plan to develop five to 10 small, flexible format stores over a two-year period once the transaction closes. The stores will be branded as TargetExpress. Each will include a CVS/pharmacy. Target and CVS Health will jointly evaluate and select locations for the new outposts.

“This strategic relationship with Target supports the highly complementary customer base, brand and culture we share,” says Larry Merlo, CVS Health’s president and CEO. “When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader healthcare focus and an appreciation of the rise of healthcare consumerism with consumer choice and accountability growing. This relationship with Target will provide consumers with expanded options and access to our unique healthcare services that lead to better health outcomes and lower overall healthcare costs.”

Following completion of this transaction, Target guests will have access to CVS Health’s pharmacy care programs and medical clinic services. Target’s cash-paying guests will also be able to access low-cost generic drug options through CVS Health. CVS Health customers will consequently gain access to the Target-based pharmacies and clinics.

“We operate in a rapidly changing healthcare and regulatory environment,” adds Merlo. “This requires companies like CVS Health to continually innovate, providing additional points of access, lowering costs and improving quality for both consumers and payors.”

The partnership allows CVS to expand its retail presence into new markets like Seattle, Denver, Portland and Salt Lake City. Target and CVS emphasized they shared the same goals of “investing in core businesses that help drive growth.”

“At Target, we’ve talked a lot about the evolving preferences of our guests and this partnership demonstrates that we’re committed to putting them at the forefront of everything we do,” says Brian Cornell, Target’s chairman and CEO. “By partnering with CVS Health, we will offer our guests industry-leading healthcare services, and at the same time, sharpen our focus on elevating the way we deliver wellness products and experiences to our guests.”

The transaction is estimated to close at the end of the year. Barclays served as the financial advisor to CVS Health, while Fried Frank of Dechert LLP served as legal advisor.

Goldman Sachs acted as financial advisor to Target, while Faegre Baker Daniels LLP, Wachtell, Lipton, Rosen & Katz, and Dorsey & Whitney advised the company on legal matters.

Woonsocket, R.I.-based CVS Health is a pharmacy innovation company with 7,800 retail drugstores, nearly 1,000 walk-in medical clinics and more than 70 million plan members. CVS’s stock price closed at $102.22 per share on Friday, June 12, up from $74.93 per share a year ago.

Minneapolis-based Target operates 1,795 discount retail stores throughout the U.S. Its stock price closed at $79.47 per share on Friday, June 12, up from $55.53 per share a year ago.

— Nellie Day

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