Complex Times for CVS — Stock Performance and Federal Court Review of Aetna Deal

Complex Times for CVS — Stock Performance and Federal Court Review of Aetna Deal

CVS is facing complex challenges on multiple fronts.

The acquisition of insurance giant Aetna by Woonsocket-based CVS was approved by the U.S. Justice Department late in 2018, but now a D.C. Federal Court is taking up the matter.

CVS’ mega-deal with Aetna has not been embraced by Wall Street. CVS stock has fallen by more than a third — the 52-week high of CVS stock was $82 a share and it closed on Tuesday at $53 a share.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

Federal Review

Last Friday U.S. District Judge Richard Leon in Washington, D.C said ”he wants to hear in court from witnesses who object to the Justice Department’s decision last year to approve CVS Health Corp.’s nearly $70 billion acquisition of Aetna Inc.—a highly unusual move that threatens to shake up the already-consummated deal,” reported the Wall Street Journal.

Leon is reviewing a department settlement issued last fall that allowed the merger after the companies agreed to sell off assets relating to Medicare drug coverage.

“This is a matter of great consequence to a lot of people,” Judge Leon the court hearing according to the WSJ. Healthcare “is a high priority issue for tens of millions of families,” said the judge.

A number of Justice Department decisions relating to mergers have run into problems with the courts.

In February, the Justice Department ended its “efforts to sink AT&T Inc.’s 2018 Time Warner, after a federal appeals court on Tuesday rejected the government’s bid to roll back the $80 billion-plus deal,” reported the Wall Street Journal.

The U.S. Court of Appeals for the District of Columbia Circuit ruled unanimously that the Justice Department was “unpersuasive” in seeking to overturn a decision by the same federal court judge now considering the CVS-Aetna deal — Judge Richard Leon. In June of 2018, Leon approved the AT&T-Time Warner deal.

Some Analyst Say Stock Is a Bargain

While the stock has been floundering, some of the Wall Street websites are saying the stock is undervalued.

“CVS has prepared to grow amid the current industry headwinds through its roughly $70 billion acquisition of Aetna, which was officially completed in November 2018. Therefore, the new firm could end up becoming a larger player in a healthcare environment that seems likely to feature more virtual medical checkups and hyper-localized care. CVS’ purchase also helps expand its reach as Amazon and others venture deeper into the pharmaceutical business, reports Zacks.

Barrons reported that “CVS Health stock languished at six-year lows last week and earlier this week, and four insiders including the chairman of the drugstore and pharmacy-benefit manager bought shares…last week that two CVS directors—Edward Ludwig, former chairman and CEO of Becton Dickinson (BDX), and Fernando Aguirre, former chairman, president, and CEO of Chiquita Brands International—bought a combined total of $432,000 of CVS stock on March 1.”