Activist Investor Takes Stake in CVS -- Update
November 25 2019 - 4:33PM
Dow Jones News
By Corrie Driebusch
Activist investor Starboard Value LP has taken a stake in CVS
Health Corp. and held talks with the drugstore-and-insurance
giant's management, according to people familiar with the
matter.
The stake appears to be relatively small and the people said the
talks, held recently, are amicable. How much Starboard currently
owns and what it has discussed with the company couldn't be
learned. But Starboard is one of the top activist-investment firms
and its presence in a stock usually causes a company to sit up and
take notice.
CVS shares have been on a roller-coaster ride since the company
acquired health insurer Aetna Inc. for nearly $70 billion almost a
year ago. The deal married CVS's sprawling drugstore network and
pharmacy-benefit manager with one of the nation's largest health
insurers.
The stock fell sharply after the Woonsocket, R.I., company in
February issued a downbeat earnings projection for the year due to
challenges in its pharmacy-benefits and long-term-care businesses.
The shares went on to rebound sharply as the company reported a
string of unexpectedly strong financial results, and research
analysts have taken a more favorable view.
Shares of CVS rival Walgreens Boots Alliance Inc. have slumped
about 25% in the past year as revenue from prescription-drug sales
slows and competition from online retailers grows. Walgreens shares
have been buoyed in recent weeks by reports of private-equity
interest. No such deal appears to be imminent, people familiar with
the matter say.
CVS stock, at around $76, is little changed in the past year
compared with a big gain in the S&P 500 index. CVS's market
capitalization currently stands at about $100 billion.
Some investors have privately expressed frustration over rising
costs from CVS's Omnicare drug-distribution business, the lack of a
clear plan for a successor to Chief Executive Larry Merlo and the
large size of its 16-member board -- a legacy of the Aetna
deal.
Bankers and lawyers who advise companies facing threats from
activists say the investors are increasingly taking stakes in large
targets and engaging with management instead of immediately going
public with their demands. More often, the investors and their
targets are finding common ground. Sometimes the campaigns never
surface publicly.
Starboard has a record of ushering in change at companies
ranging from eBay Inc. to Darden Restaurants Inc. Earlier this
year, it urged eBay to exit businesses unrelated to its core
marketplace after taking a stake in the San Jose, Calif., company.
On Monday, eBay agreed to sell its StubHub ticketing business for
more than $4 billion.
Starboard didn't report a stake in CVS in its latest quarterly
filing with the Securities and Exchange Commission. Those filings
are delayed -- the latest revealed the New York hedge fund's
holdings as of Sept. 30 -- and some information may be omitted as
investors can receive confidential treatment if they are in the
process of building a position.
--Sharon Terlep contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
November 25, 2019 16:18 ET (21:18 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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