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.”