It will likely be a while before CVS Health Corp. completes its $68 billion purchase of insurer Aetna Inc. But it’s already laying the very expensive groundwork.
CVS on Tuesday launched one of the biggest-ever corporate-debt sales to fund the merger. All that debt will also form one of the biggest barriers to the union’s success.
This deal is more ambitious than most, aiming to remake the U.S. health care sector. That’s a tough job, and a $70 billion debt overhang won’t make it any easier.
CVS and Aetna had plenty of debt going into the deal, contributing to the enormity of the pair’s combined load. The chart below — an update of one originally produced by my colleague Tara Lachapelle — gives a sense of the magnitude of the future obligations. The need to service and pay down this debt will be a major constraint on the new company’s ability to invest in its business.
Integrating two businesses that have never before been combined is just the start. The principal benefit of the union will arguably be directing Aetna enrollees to CVS pharmacies and clinics in a way that generates revenue and reduces costs — but does not alienate customers.
CVS’s in-store clinics will be key to that effort. CVS currently has clinics in 1,134 of its 9,803 retail locations. It must expand that footprint and match it to the geographic distribution of Aetna’s enrollees.