CVS to Buy Target Pharmacy Business

CVS Health Corp. on Monday said it agreed to buy Target Corp.'s pharmacy and clinic businesses for about $1.9 billion in a deal that will significantly grow CVS's retail presence.

The deal includes more than 1,660 pharmacies, which CVS will rebrand as CVS/pharmacy and operate through a store-within-a-store format. The transaction also includes nearly 80 clinics, which will be rebranded as MinuteClinic.

CVS said it expects the deal to generate significant sales and prescription volumes, while boosting its presence in new markets such as Seattle and Portland.

For its part, Target expects the move to increase its focus on wellness and drive long-term traffic. The retailer said it expects the sale to bring in $1.2 billion after taxes, which it said it could use to fund share buybacks.

"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," said Target Chief Executive Brian Cornell.

After a long stretch of weak traffic and sales, Target has refocused itself on profitable categories like apparel and home goods and bringing back a sense of uniqueness to its stores.

The transaction set the stage for further collaboration between CVS and Target. They already have plans to open five to 10 small stores after the deal closes, which will each be branded as TargetExpress and include a CVS/pharmacy.

"We operate in a rapidly changing health care and regulatory environment," said CVS Health CEO Larry 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."

As a result of the Target transaction and its $10.4 billion deal to buy Omnicare Inc., CVS said it would scale back its share buybacks this year to $5 billion from $6 billion.

CVS operates around 7,800 retail pharmacies in the U.S., but in recent years has expanded its operations to other areas of the pharmaceutical supply chain. The company's May agreement to buy Omnicare was seen as strengthening its foothold as a dispenser of expensive prescription drugs.

Write to Chelsey Dulaney at [e-mail]

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