Friday, March 30, 2018

Walmart may be acquiring Humana, says report

Walmart is in early stage talks to acquire health insurer Humana, according to a report from The Wall Street Journal. Terms of the deal are unknown, but Humana is valued at $37 billion and reported net income of $2.4 billion on $53.8 billion in revenues during 2017. The deal would allow the retailer to strengthen its relationship with a key demographic, seniors, the report explained, and would complement its existing pharmacy and clinic businesses.

It’s not clear that there will be an acquisition, or even if regulators would allow it, at this point.

But if the deal were to happen, it would be one of many mergers and acquisitions taking place in the industry in recent months, the report noted. For example, CVS Health agreed to acquire Humana rival Aetna for $69 billion in December; Cigna agreed to buy Express Scripts for $54 billion in March.

Related to this, Walmart’s nemesis Amazon has been said to be considering an entry into the pharmacy market itself, which could cut into Walmart’s sizable pharmacy business. The retailer has pharmacies in its 4,700 some stores and in many of its Sam’s Club stores. It also said in January it would partner with JPMorgan and Berkshire to tackle rising healthcare costs by forming a company to provide healthcare for their thousands of U.S. workers.

Humana is the second-largest provider of Medicare Advantage plans, the private insurance plans offered through Medicare. That would allow Walmart to stay connected to its senior customers, in light of the increased competition. The deal would also accompany other moves Walmart is making in healthcare, including its plans to offer lab-testing in some stores where it already has primary-care clinics – all part of its larger plan to be a one-stop shop for customers’ healthcare needs.

The deal would be Walmart’s largest by a wide margin if it went through. To date the retailer’s other biggest deals were the 1999 acquisition of Asda Group for $10.8 billion and the $3.3 billion acquisition of Jet.com in 2016.