Mergers and Acquisitions

Friday M&A Hints – SONC, Pandora, CVS-AET

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SIRI-Pandora

SONC by Inspire Brands

CVS

  • Want to add shares of CVS; consider looking at the CVA-AET deal for an indirect discount versus buying shares now with cash. Be sure to consider deal-default risk though!
Dividend Investing | Mergers and Acquisitions

Cigna-Express Scripts DOJ Approval Means Good News for CVS-Aetna Deal

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In December 2017, CVS agreed to acquire Aetna for $69 billion. [2]
M&A positive signal:  With the U.S. Department of Justice now approving Cigna’s acquisition of Express Scripts (should be completed end of 2018), investors sitting/waiting on the CVS-Aetna deal have reason to smile:

“The Cigna decision bodes well for rivals CVS Health and Aetna, in terms of their bid to become an integrated PBM and health insurer.” [1]

We already know from previous media reports that things are looking good for DOJ approval of the deal and a current CNBC article sums it up nicely:

“CVS (CVS) and Aetna (AET) have expressed confidence that they will receive anti-trust clearance and close the deal by year’s end. Reuters reports that a source [familiar] with matter said a decision in their merger could come by the end of this month.” [1]

Arbitrage notes:  There is still a positive (yet small) price gap in the CVS-AET deal.  As of today, with AET at $205/sh and CVS at $78, if you factor in the deal terms, it’s about a 2.6% basic return.  If they can pull it off within 3 months, that’s roughly 11% annualized.

For a contrarian view of this arbitrage play, check out this pretty good article at Investor Place from Sept. 11:

Aetna Stock Should Have More Upside, But There’s One Key Risk

Sources:

[1] https://www.cnbc.com/2018/09/17/doj-clears-cignas-acquisition-of-express-scripts.html

[2] Pic: https://en.wikipedia.org/wiki/CVS_Health

[3] https://www.businesswire.com/news/home/20180917005680/en/U.S.-Department-Justice-Grants-Clearance-Cigna%E2%80%99s-Acquisition

[4] https://investorplace.com/2018/09/aetna-stock-should-have-more-upside-but-theres-one-key-risk/