CVS Health Corp. on Monday said it agreed to buy Target Corp.'s
pharmacy and clinic businesses for about $1.9 billion in a deal
that will significantly grow CVS's retail presence.
The deal includes more than 1,660 pharmacies, which CVS will
rebrand as CVS/pharmacy and operate through a store-within-a-store
format. The transaction also includes nearly 80 clinics, which will
be rebranded as MinuteClinic.
CVS said it expects the deal to generate significant sales and
prescription volumes, while boosting its presence in new markets
such as Seattle and Portland.
For its part, Target expects the move to increase its focus on
wellness and drive long-term traffic. The retailer said it expects
the sale to bring in $1.2 billion after taxes, which it said it
could use to fund share buybacks.
"By partnering with CVS Health, we will offer our guests
industry leading health-care services, and at the same time,
sharpen our focus on elevating the way we deliver wellness products
and experiences to our guests," said Target Chief Executive Brian
Cornell.
After a long stretch of weak traffic and sales, Target has
refocused itself on profitable categories like apparel and home
goods and bringing back a sense of uniqueness to its stores.
The transaction set the stage for further collaboration between
CVS and Target. They already have plans to open five to 10 small
stores after the deal closes, which will each be branded as
TargetExpress and include a CVS/pharmacy.
"We operate in a rapidly changing health care and regulatory
environment," said CVS Health CEO Larry 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."
As a result of the Target transaction and its $10.4 billion deal
to buy Omnicare Inc., CVS said it would scale back its share
buybacks this year to $5 billion from $6 billion.
CVS operates around 7,800 retail pharmacies in the U.S., but in
recent years has expanded its operations to other areas of the
pharmaceutical supply chain. The company's May agreement to buy
Omnicare was seen as strengthening its foothold as a dispenser of
expensive prescription drugs.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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