Wall Street analysts puzzled by CVS Health foray into insurance

Wall Street analysts are a bit confused by pharmacy CVS Health’s possible purchase of health insurance provider Aetna, the largest proposed deal ever for the insurance industry.

Calling the idea “insane,” Jefferies health-care desk analyst Jared Holz said CVS’ move to acquire Aetna came much sooner than he expected.

“My view will be [of which there will be] too much debt here in addition to CVS winds up being levered nearly 5x to get This particular done,” said Holz in a note to clients. “The entire supply chain will be a structural short until Amazon [will be] proven to be [an] anemic player. Which won’t happen.”

If CVS bought the health insurer at the proposed cost of $0 per share, the $66 billion deal would certainly be the largest ever inside the health insurance history, based on analysis of Thomson Reuters data.

Shares of CVS have fallen nearly 9 percent since the news of the deal broke, with the stock closing down 6 percent Friday.

Many Wall Street analysts feel of which such a costly move by CVS would certainly be in direct response to e-commerce giant Amazon.com’s moves into the pharmaceutical space. CNBC reported in May of which Amazon has been recruiting health insurance experts to develop an internal pharmacy benefits manager for Amazon employees.

“I hear smart people tell me the item’s a slam dunk in addition to different people say the item could have a lot of problems,” Cowen analyst Charles Rhyee told CNBC. “the item’s a lot to spend, in addition to the item’s not of which by doing so CVS will automatically transform its retail footprint.”

“We see the move into healthcare services as a natural defense against the potential threat of Amazon,” he added in a note. “Our question, however, will be why can’t CVS affect the transformation into a healthcare platform on its own?”

Based on Rhyee’s estimates, CVS could end up paying out more than $75 billion for Aetna, exceeding the company’s current $70.9 billion market cap.

CVS did not immediately respond to CNBC’s request for comment.

“Couldn’t CVS effect the adjustments to its retail footprint in addition to then partner with multiple health plans, including Aetna, in addition to achieve similar results with less capital?” asked Rhyee, suggesting of which CVS could “roll up” the entire $16 billion urgent-care market if the item wanted.

To be sure, CVS has been trying to establish greater control in its corner of the health-care industry. In 2007, the company acquired Caremark pharmacy benefits manager, which has more than 75 million plan members.

Following the Caremark acquisition, the company changed its name to CVS Health via CVS in addition to permanently halted cigarette in addition to cigar sales in 2014.

— With reporting by Meg Tirrell.

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