WOONSOCKET, R.I. and
MINNEAPOLIS, June 15, 2015 /PRNewswire/ -- CVS Health
Corporation (NYSE:CVS) and Target Corporation (NYSE:TGT) announced
today that they have entered into a definitive agreement for CVS
Health to acquire Target's pharmacy and clinic businesses for
approximately $1.9 billion. Through
this agreement, CVS Health will acquire Target's more than 1,660
pharmacies across 47 states and operate them through a
store-within-a-store format, branded as CVS/pharmacy. In addition,
a CVS/pharmacy will be included in all new Target stores that offer
pharmacy services. Target's nearly 80 clinic locations will be
rebranded as MinuteClinic, and CVS Health will open up to 20 new
clinics in Target stores within three years of the close of the
transaction. The new clinics will be part of CVS/minuteclinic's
plan to operate 1,500 clinics by 2017. In addition, CVS Health and
Target plan to develop five to 10 small, flexible format stores
over a two-year period following the deal close, which will each be
branded as TargetExpress and include a CVS/pharmacy.
This strategic relationship brings together two leading
retailers with complementary strengths, brands and cultures to
enhance the health care experience for Target guests while
expanding CVS Health's retail presence in new markets, such as
Seattle, Denver, Portland and Salt Lake City. The
transaction enables CVS Health to reach more patients, adding a new
retail channel for its offerings, and expanding convenient options
for consumers. Given CVS Health's proven success in growing its
business, the relationship is expected to benefit Target's
long-term traffic and sales growth. It also enables Target to
strengthen its focus on wellness as a signature
category. Moving forward, enhanced efforts by Target will
center on continuing to deliver products and experiences to help
guests eat well, be active and find natural and clean label
products.
"This strategic relationship with Target supports the highly
complementary customer base, brand and culture we share," said
Larry Merlo, CVS Health President
and CEO. "When we introduced the new name for our company, CVS
Health, we began a new era of growth with a broader health care
focus and an appreciation of the rise of health care consumerism
with consumer choice and accountability growing. This
relationship with Target will provide consumers with expanded
options and access to our unique health care services that lead to
better health outcomes and lower overall health care costs."
"At Target, we've talked a lot about the evolving preferences of
our guests and this partnership demonstrates that we're committed
to putting them at the forefront of everything we do," said
Brian Cornell, Target Chairman and
CEO. "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."
Following completion of the transaction, Target guests will have
access to CVS Health's leading pharmacy care programs and medical
clinic services. Pharmacy programs, including Pharmacy Advisor,
Specialty Connect and Maintenance Choice, will help consumers
achieve better medication adherence through both improved
convenience as well as enhanced pharmacy care counseling. CVS
Health has also committed to having a low-cost generic drug option
available to Target's cash-paying guests. In addition, with
MinuteClinic at Target locations, Target guests will have enhanced
access to high-quality affordable medical care. CVS Health
customers will gain the option of an expanded, one-stop Target
shopping experience, including apparel, home, fresh food and more,
when seeking health care services.
The strategic relationship also unlocks future joint development
opportunities. Together, Target and CVS Health will carefully
evaluate and select locations best-suited for new small format
Target stores with a CVS/pharmacy inside. Additionally, Target and
CVS Health will explore innovative, new market offerings that have
the potential to generate strong returns on investment and offer
long-term benefits for customers and communities.
"We operate in a rapidly changing health care and regulatory
environment," added CVS Health's 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."
This acquisition is consistent with each company's stated goals
of investing in core businesses that help drive growth.
CVS Health expects this transaction to generate significant
sales and prescription volumes upon closing, and to generate
significant operating profit over the long term. The company will
finance the transaction with additional debt. In combination
with CVS Health's planned acquisition of Omnicare, this transaction
will increase the company's Adjusted Debt to EBITDA leverage ratio
to approximately 3.2x. In support of reaching its leverage target
of 2.7x, CVS Health is reducing its share repurchase guidance for
2015 by $1 billion, from $6 billion to $5 billion. This reduction in
share repurchases reduces the company's 2015 Adjusted Earnings Per
Share guidance by approximately one
cent per share and will lower 2016 Adjusted Earnings Per
Share by approximately 4 cents per
share.
The timing of closing the transaction is uncertain; assuming it
closes near the end of the year, the transaction is expected to be
approximately 6 cents dilutive to CVS
Health's Adjusted Earnings Per Share in 2016. This includes the
dilutive impact to 2016 from the lower 2015 share repurchase of
approximately 4 cents per share as
well as financing costs of approximately 5
cents per share; it excludes integration costs and any
transaction or one-time costs associated with the deal. On the same
basis, the transaction is expected to be approximately 10 cents accretive to CVS Health's Adjusted
Earnings Per Share in 2017, and at least 12
cents accretive to CVS Health's Adjusted Earnings Per Share
in 2018 and beyond.
This transaction will allow Target to continue offering this
traffic-driving business in its stores and deliver a differentiated
experience in support of its wellness efforts. Target's after-tax
net proceeds from the transaction are expected to be approximately
$1.2 billion, which Target expects to
deploy in support of its long-standing capital priorities,
including share repurchase. The transaction is expected to benefit
Target's Segment EBITDA and EBIT margins post-close, is expected to
be accretive to Target's EPS immediately following the deal close,
and is expected to add half a percentage point or more to Target's
return on invested capital over time.
The transaction is subject to customary closing conditions,
including necessary regulatory clearance. In-store changes will be
rolled out over a period of several months thereafter, as CVS
Health and Target work to ensure the smoothest possible transition
for all pharmacy and clinic patients. CVS Health is committing
to offering the approximately 14,000 in-store Target health care
professionals comparable positions with CVS Health as part of the
transition. Also following the deal closing, Target will
further evaluate the business impact and related support needs at
its headquarters locations.
Barclays served as the financial advisor to CVS Health. CVS
Health was advised on transaction legal matters by Fried Frank and
on regulatory matters by Dechert LLP.
Goldman Sachs acted as financial advisor to Target. Faegre
Baker Daniels LLP, Wachtell, Lipton, Rosen & Katz, and Dorsey
& Whitney advised Target on legal matters.
Teleconferences and Webcasts
CVS Health will be
holding a conference call today for the investment community at
8:30 am (EDT) to discuss the
transaction. The dial-in number for the call is (800) 755-1805 or,
for international callers, (212) 231-2909. An audio webcast
of the call will be broadcast simultaneously on CVS Health's
website for all interested parties. To access the webcast, please
visit the investor relations section of the company's website at
http://investors.CVSHealth.com/ A replay of the call will be
available for 7 days starting at 10:30 am
(EDT) on June 15 through
10:30 am (EDT) on June 22. The replay number for the call is (800)
633-8284 or, for international callers, (402) 977-9140 (passcode:
21770599). The webcast will be archived and available on the CVS
Health website for a one-year period following the conference
call.
Target will hold a conference call at 9:45 a.m. EDT today. Investors and the media are
invited to listen to the call at Target.com/Investors (hover over
"company" then click on "events & presentations" in the
"investors" column). A telephone replay of the call will be
available beginning at approximately 12:30
p.m. EDT today through the end of business on June 22, 2015. The replay number is (855)
859-2056 (passcode: 66577154).
About CVS Health
CVS Health (NYSE: CVS) is a pharmacy
innovation company helping people on their path to better
health. Through its 7,800 retail drugstores, nearly 1,000
walk-in medical clinics, a leading pharmacy benefits manager with
more than 70 million plan members, and expanding specialty pharmacy
services, the Company enables people, businesses and communities to
manage health in more affordable, effective ways. This unique
integrated model increases access to quality care, delivers better
health outcomes and lowers overall health care costs. Find more
information about how CVS Health is shaping the future of health at
www.cvshealth.com.
About Target
Minneapolis-based Target Corporation (NYSE:
TGT) serves guests at 1,795 stores and at Target.com. Since 1946,
Target has given 5 percent of its profit to communities, that
giving equals more than $4 million a
week. For more information, visit Target.com/Pressroom. For a
behind-the-scenes look at Target, visit Target.com/abullseyeview or
follow @TargetNews on Twitter.
CVS Health Forward-Looking Statement
This press
release contains forward-looking statements within the meaning of
the federal securities laws. By their nature, all
forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by the
forward-looking statements for a number of reasons as described in
our Securities and Exchange Commission filings, including those set
forth in the Risk Factors section and under the section entitled
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K and Quarterly
Report on Form 10-Q.
Target Forward-Looking
Statement
Statements by Target in this release
regarding the expected benefits to Target's long-term traffic and
sales growth, Target's expected after-tax proceeds from the
transaction and the expected impact of the transaction on Target's
Segment EBIT margins, EPS and ROIC are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements speak only as of the date they are made
and are subject to risks and uncertainties that could cause
Target's actual results to differ materially. The most important
risks and uncertainties include those relating to the certainty
around satisfying the conditions to closing the transaction, how
Target's guests react to the transaction, the effectiveness of the
ongoing relationship between Target and CVS Health, whether Target
will recognize the expected benefits from the transaction and the
risks described in Item 1A of Target's Form 10-K for the fiscal
year ended January 31, 2015.
Contacts:
For CVS Health:
Nancy
Christal, Investor Relations, (914) 722-4704
Carolyn Castel, Corporate
Communications, (401) 770-5717
Carolyn.Castel@CVSHealth.com
For Target:
John
Hulbert, Investors, (612) 761-6627
Dustee Jenkins, Media, (612)
761-9537
Target Media Hotline, (612) 696-3400
press@target.com
Logo -
http://photos.prnewswire.com/prnh/20140905/143585
Logo - http://photos.prnewswire.com/prnh/20150615/222933LOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cvs-health-and-target-sign-agreement-for-cvs-health-to-acquire-rebrand-and-operate-targets-pharmacies-and-clinics-300098907.html
SOURCE CVS Health Corporation