CVS Health Corporation (CVS), a healthcare provider, said on Wednesday that it has inked a deal to buy Oak Street Health, Inc. (OSH), healthcare network of primary care centers for older adults, for $39 per share or around $10.6 billion in cash.
CVS Health expects to fund the transaction, which is expected to be closed in 2023, through own sources.
CVS Health projects over $500 million in synergy potential over time, enhancing CVS Health's long-term adjusted operating income growth.
By 2026, Oak Street Health will have over 300 centers, each of which has the potential to contribute $7 million of Oak Street Health adjusted EBITDA at maturity, representing over $2 billion of Oak Street Health embedded adjusted EBITDA at that time, the company said.
Over 50 percent of Oak Street Health's patients have a housing, food or isolation risk factor. It employs around 600 primary care providers and has 169 medical centers across 21 states.
Looking ahead, for the fiscal 2023, CVS Health reaffirmed its guidance for adjusted earnings per share (EPS) of $8.70 - $8.90.
On average, 22 analysts polled by Thomson Reuters expect the firm to report profit per share of $8.86, for the year. Analysts' estimates typically exclude special items.
For 2024, CVS Health sees adjusted EPS of around $9, growing to around $10 per share in 2025. The upside in 2025 based upon the successful resolution of its Medicare Stars Ratings mitigation efforts.
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