CVS Health will buy Chicago-based primary care provider Oak Street Health in a deal valued at $10.6 billion, the healthcare pharmacy said Wednesday.
Woonsocket, Rhode Island-based CVS has agreed to pay $39 per share in cash and assume debt in a transaction set to close this year, assuming regulatory approval. Oak Street CEO Mike Pykosz will continue to lead the operation.
Oak Street, which will become part of CVS’ healthcare delivery organization, employs about 600 providers in 169 locations across 21 states. It is expected to grow to 300 locations by 2026, CVS said.
More than 90% of Oak Street’s centers operate in underserved areas with average incomes below 300% of the federal poverty level.
The Oak Street acquisition comes as major retailers, including Walgreens Boots Alliance and Amazon, have been striking deals to expand their presence in healthcare services.
The Oak Street deal is expected to create $500 million in savings in the coming years by accelerating Oak Street’s patient growth, increasing collaborative opportunities with CVS’ pharmacy and pharmacy benefit manager Caremark and encouraging retention of Aetna Medicare Advantage members with access to Oak Street physicians, among other factors.
In September, CVS announced plans to buy Signify Health, a home health and physician enablement technology company, in an $8 billion deal set to close in the second quarter. Signify employs more than 10,000 clinicians in all 50 states.
“We are entering 2023 with tremendous momentum,” CVS President and CEO Karen Lynch said on Wednesday’s investor call. “We continue to make progress on our strategy and will enhance the capabilities of our value-based care platform through the Oak Street Health and Signify Health acquisitions. We are excited about the opportunities ahead of us.”
CVS on Wednesday reported fourth-quarter net income of $2.3 billion, a 77.5% increase from a year ago. Revenue rose 9.5% to $83.85 billion. Operating costs increased 7.9% to $80.23 billion.
For the full year, CVS reported net income of $4.17 billion, a 47.3% year-over-year drop. Revenue increased 10.4% to $322.47 billion.
The Wall Street Journal on Monday reported that CVS and Oak Street were expected to close the deal as early as this week, sending Oak Street shares soaring when the market opened on Tuesday. It opened at $34.86 per share Wednesday, the highest opening price in the past year.
CVS shares opened at $88.12 each, down 20.5% from a year ago.
This is a developing story. Check back for updates.
