Target sells pharmacies, clinics to CVS for $1.19 billion
Drugstore operator聽CVS聽Health Corp said it will acquire聽Target聽Corp's U.S. pharmacy and clinics businesses for about $1.9 billion to boost sales and prescription volumes.
The second-largest U.S. drugstore operator said it will acquire more than 1,660聽Target聽pharmacies in 47 states and operate them through a store-within-a-store format, while聽Target's nearly 80 clinics will be rebranded as MinuteClinic.
Every new聽Target聽store聽that offers pharmacy services will include a聽CVS聽pharmacy and聽CVS聽will open up to 20 new clinics in聽Target聽stores within three years of the deal closing, the companies said in a statement.
CVS, already present in 40 states, said the deal will help it expand in markets such as聽Denver,聽Colorado;聽Seattle,Washington; Portland,聽Oregon聽and聽Salt Lake City,聽Utah.
CVS聽shares rose 0.8 percent to $103 and聽Target聽rose 0.9 percent to $80.16 in premarket trading on Monday.
This is聽CVS's second deal this year, after a $10.1 billion purchase of prescription services provider Omnicare Inc in May. The deal gave聽CVS聽access to the older, sicker U.S. population and built on its specialty pharmacy.
CVS聽and聽Target聽said they plan to develop five to 10 small-format stores - branded as TargetExpress and including a聽CVS聽pharmacy - over two years after the deal closes, expected near the end of 2015.
CVS聽has committed to provide聽Target's cash-paying guests low-cost generic drug options and about 14,000聽Targethealth care professionals comparable positions at聽CVS.
CVS聽said it will finance the deal through debt. To lower its leverage ratio聽CVS聽reduced its 2015 share repurchasetarget聽to $5 billion from $6 billion.
The company also cut its 2015 adjusted earnings forecast by about 1 cent per share and 2016 forecast by about 4 cents per share due to the reduced stock buyback聽target.
The deal will reduce聽CVS's 2016 adjusted earnings by about 6 cents per share, but add to聽Target's profit once the deal closes.
Target聽said it plans to use the expected $1.2 billion after-tax proceeds from the deal for initiatives such as to shares repurchases.
Target聽last week doubled its share buyback program to $10 billion and also raised its dividend.
Barclays聽is聽CVS's financial adviser, while聽Target's is Goldman Sachs.
CVS's legal adviser is聽Fried Frank聽and regulatory adviser is聽Dechert LLP.聽Target's legal advisers are Faegre Baker Daniels LLP, Wachtell, Lipton, Rosen & Katz, and Dorsey & Whitney. (Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sriraj Kalluvila and Savio D'Souza)
