Drugs Pharma

CVS set to acquire Oak Street Health for $10.6 billion in cash

CVS Health, a US healthcare company, is set to acquire Oak Street Health in an all-cash deal valued at $10.6 billion, according to a company statement.

HQ Team

February 9, 2023: CVS Health, a US healthcare company, is set to acquire Oak Street Health in an all-cash deal valued at $10.6 billion, according to a company statement.

The stocks were bought at $39 per share in cash. CVS Health expects to fund the transaction through available resources and existing financing capacity.

The transaction was approved by the board of directors of both companies and is subject to approval by a majority of Oak Street Health’s stockholders, receipt of regulatory acceptance and satisfaction of other customary closing conditions. 

Private equity funds affiliated with Newlight Partners LP and General Atlantic LLC and certain members of the Oak Street Health board of directors, which collectively own approximately 45% of the common stock of Oak Street Health, have agreed to vote in favour of the transaction.

Deal to close this year

CVS Health and Oak Street Health anticipate that the transaction will close in 2023.

By 2026, Oak Street Health will have over 300 centres, each of which has the potential to contribute $7 million of Oak Street Health adjusted EBITDA at maturity.

CVS Health projects more than $500 million in synergy potential over time, enhancing CVS Health’s long-term adjusted operating income growth, according to the statement.

CVS Health forecasts it will achieve 2023 Adjusted EPS in the range of $8.70 to $8.90. CVS Health is now targeting 2024 Adjusted EPS of approximately $9.00, growing to about $10.00 in 2025, with an upside in 2025 based on the successful resolution of its Medicare Stars Ratings mitigation efforts.

Reducing healthcare costs

Oak Street Health is a value-based primary care company helping older adults stay healthy. CVS Health and Oak Street benefit patients’ long-term health by reducing care costs and improving outcomes – particularly for those in underserved communities.

Oak Street Health employs approximately 600 primary care providers and has 169 medical centres across 21 states in the US. It has community, home and digital services.

“Combining Oak Street Health’s platform with CVS Health’s unmatched reach will create the premier value-based primary care solution,” said CVS Health President and CEO Karen S. Lynch. “Enhancing our value-based offerings is core to our strategy as we continue redefining how people access and experience more affordable, convenient and connected care.”

Oak Street Health CEO Mike Pykosz will continue to lead Oak Street Health, which will become part of CVS Health’s recently formed Health Care Delivery organization.

“Oak Street Health is a premier value-based primary care platform,” said CVS Health Chief Financial Officer Shawn M. Guertin. “We believe that in partnership with CVS Health, Oak Street Health can accelerate its growth and provide an attractive return to our shareholders over time.”

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