- M&A
- September 7, 2022
- 4 minutes read
Pharmacy Giant CVS To Buy Home Care Group Signify Health For $8B
The latest big acquisition is coming from the healthcare sector. CVS Health (NYSE: CVS), a firm best known for its…
The latest big acquisition is coming from the healthcare sector. CVS Health (NYSE: CVS), a firm best known for its eponymous pharmacy chain, is acquiring Signify Health (NYSE: SGFY), a home care provider. CVS will pay $30.50 in cash for each Signify share, adding up to $8bn.
- According to reports, Signify recently put itself up for sale and got offers from many suitors including CVS and tech giant Amazon. Now, it’s clear that CVS emerged as the winning bidder.
Signify Health offers home care services across the U.S. through its network of 10,000 clinicians. Many of its customers are older patients covered by the U.S. government-funded Medicare program.
CVS Health is a massive healthcare conglomerate. It’s the fourth-largest American company by revenue — $292bn in 2021 — and the fifth is its arch-rival UnitedHealth Group ($288bn in 2021). The company owns CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager; and Aetna, a health insurance provider, among other services.
- CVS is a healthcare whale swallowing smaller fish (Signify Health) to shore up its business. Signify brought in $773mn in revenue in 2021, less than 1% of CVS Health’s revenue in the same year. Yet, CVS is paying over 10x annual sales for the company, betting on substantial growth in the home care market.
Signify Health was formed in 2017 by a merger of two health firms; CenseoHealth and Advance Health. The merger was engineered by New Mountain Capital, a New York-based buyout firm, which listed Signify on the public markets in 2021.
New Mountain Capital owns a majority 55% stake in Signify, meaning it’ll receive $4.4bn from the sale to CVS Health. Another notable shareholder is Steve Wiggins, a healthcare entrepreneur, with a 4.4% stake. Wiggins’ healthcare payments company, Remedy Partners, merged with Signify in 2019.
- This deal represents a turnaround in Signify’s fortunes. The company went public at $24 per share last year and sank to $12 by June 2022. Now, barely three months after, it’s sealed a deal to sell for more than double that low price point.
- If all goes as planned, this deal will close in the first half of 2023.
