Walgreens-backed VillageMD buys Summit Well being for B

Walgreens-backed VillageMD buys Summit Well being for $9B

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Dive Transient:

  • VillageMD has agreed to amass medical apply Summit Well being for $8.9 billion together with debt, the first care supplier introduced Monday.
  • VillageMD, which is majority owned by pharmacy chain Walgreens, and Summit Well being, the dad or mum firm of CityMD, plan to mix their supplier areas and VillageMD’s expertise with value-based care to assist speed up the transition to threat for payer purchasers.
  • Cigna’s well being providers division Evernorth can also be taking a stake within the deal, and can develop into a minority proprietor in VillageMD on the deal’s shut, anticipated within the first quarter of 2023.

Dive Perception:

The deal first reported in late October is the most recent in a string of M&A within the main care area from massive corporations seeking to step deeper into healthcare. Walgreens has been significantly lively, making a U.S. healthcare division comprised of VillageMD, specialty pharmacy firm Shields Well being Options and at-home care supplier CareCentrix, together with different well being ventures.

Walgreens beforehand anticipated the division to succeed in profitability in 2024. Nevertheless, buying Summit “accelerates [Walgreens’] path to profitability for its U.S. Healthcare section,” with profitability now anticipated by the tip of the 2023 fiscal yr, based on a launch on the deal.

Walgreens first invested in VillageMD in 2020 earlier than doubling its possession stake a bit greater than a yr in the past with a further funding of $5.2 billion within the main care providers supplier, growing its stake from 30% to 63%. Walgreens plans to construct 1,000 main care clinics inside its pharmacies by 2027 in partnership with VillageMD.

Summit Well being was created in 2019 by way of the merger of Summit Medical Group and CityMD, an pressing care supplier within the New York metro space. The supplier has greater than 370 areas in New Jersey, New York, Connecticut, Pennsylvania and Oregon, based on its web site.

It’s presently owned by New York-based personal fairness agency Warburg Pincus, which acquired CityMD in 2017 and took a majority stake in Summit following the merger.

In line with reporting by The Wall Road Journal, Walgreens preempted a gross sales course of that Summit was anticipated to kick off subsequent yr. Summit was about to interview banks earlier than it obtained acquisition curiosity from VillageMD.

Collectively, VillageMD and Summit can have greater than 680 supplier areas in 26 markets.

In a press release, Summit CEO Jeff Alter stated the 2 corporations have “complementary choices” that can drive future success.

“Including our experience and geographic protection to VillageMD’s confirmed value-based main care strategy will improve the lives of so many sufferers and physicians throughout the nation, serving to to decrease healthcare prices and enhance the well being of our communities. We’re extremely excited concerning the potential of those mixed corporations,” Alter stated. 

Walgreens will make investments $3.5 billion by way of a good mixture of debt and fairness to help the acquisition, and can retain 53% possession in VillageMD after the deal closes.

The transaction is predicted to be barely accretive to Walgreens’ earnings in 2023.

The report comes amid a frenzy of M&A exercise within the main care area, together with Amazon’s $3.9 billion buy of One Medical in July and CVS Well being’s deal to amass Signify Well being for roughly $8 billion final month. 

CVS was additionally reportedly in unique talks to buy main care supplier Cano Well being, although the 2 have since tabled discussions. Cano has additionally obtained curiosity from insurer Humana, the WSJ has reported.