A recent statement by CVS Health Corp, confirms it will buy Target Corp.’s pharmacy business, in addition to Target’s clinic business. The statement, which released on Monday, explains that the deal is part of the CVS strategy to grow its retail space. The deal is for $1.9 billion.
Included in the deal is over 1,660 pharmacies and close to 80 clinics. CVS plans to rebrand the Target pharmacies as CVS/pharmacy, and the clinics will become CVS Minute Clinics. For CVS, the deal with increase company revenue by bolstering sales and number of prescriptions. Also, the company will expand into new markets that include Portland and Seattle.
For Target, it expects to receive long-term traffic and expand how it provides wellness products to customers to establish a stronger focus in this area. The deal, after taxes, will bring in about $1.2 billion, which the company says it will put toward funding share buybacks. Target is slowly coming back after a period of weak sales.
The deal will also provide a starting point for future partnerships between Target and CVS. Once the deal officially comes to a close, up to ten small stores will open that will be branded as TargetExpress and have a CVS/pharmacy within them.
Given that CVS made a $10.4 billion deal with Omnicare Inc. in May, in addition to the Target deal, it plans to lower its share buybacks for the year’s remainder. Rather than being $6 billion, it will recede to $5 billion.
The recent Omnicare deal was viewed by industry insiders as a move by CVS to strengthen its position as a dispenser of costly prescription drugs. CVS has been expanding its reach in the pharmaceutical area. The Target deal helps launch CVS into the retail industry, giving it a further reach to consumers and diversification in its services.