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CVS Health to acquire Oak Street Health for $10.6 billion

by John R. Fischer, Senior Reporter | February 09, 2023
Business Affairs Primary Care
CVS Health is close to acquiring Oak Street Health for $10.5 billion, say sources.
Marking its second major acquisition in months, CVS Health is set to acquire primary care center operator Oak Street Health (OSH) for about $10.6 billion.

CVS announced the news on February 8, saying it will pay $39 per share in an all-cash transaction for the multipayor, value-based primary care company, which provides services to older adults. The Wall Street Journal reported the day before that the two were close to entering a deal.

OSH has 169 medical sites across 21 states that care for Medicare patients, and employs approximately 600 primary care providers. It is expected to have over 300 centers by 2026, each potentially contributing $7 million of OSH's Adjusted EBITDA at maturity, which adds up to more than $2 billion of OSH's embedded Adjusted EBITDA at that time.

CVS Health projects this will lead to more than $500 million in synergy potential over time, enhancing its long-term adjusted operating income growth. The deal will also deepen CVS Health's primary care business.

"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 Lynch in a statement.

OSH will become part of CVS Health's recently formed Health Care Delivery organization and continue serving its extensive network of health plan partners and patients, as per CVS Health's payor-agnostic approach for delivering leading solutions.

OSH's leading solution is Canopy, a technology fully integrated within its operations to determine the appropriate type and level of care for each patient. CVS Health plans to enhance this care with its community, home and digital offerings.

News of CVS pondering a deal with OSH first emerged in January and sent shares for OSH soaring 27% in after-hours trading, after closing 4.25% higher at $22.57 on January 9 at a market cap of $5.5 billion.

The pharmacy giant acquired home healthcare service company Signify Health in September 2022 for about $8 billion, beating out UnitedHealth, Amazon and Option Care Health, and allowing it to extend into new areas of healthcare delivery.

Both companies expect to complete the deal in 2023.

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