CVS Health announced Monday that it's acquiring Target's pharmacy business for $1.9 billion as part of its plan to strengthen its presence in the senior care market.
The deal allows CVS to take over 1,660 pharmacies across 47 states and 80 clinics. All will be rebranded as CVS Pharmacy and MinuteClinic. About 14,000 employees will be absorbed by the company.
"This strategic relationship with Target supports the highly complementary customer base, brand and culture we share," said Larry Merlo, CVS Health president and CEO, in a press release. "This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs."
The retail giant decided to let go of its pharmacy business so that it could allocate its resources to other areas of business. Target CEO Brian Cornell admitted that the company does not have enough knowledge to run a pharmacy business, reported the Washington Post.
CVS plans to open an additional 20 clinics in Target stores over the next three years. The company expects the acquisition to improve the company's presence in new markets such as Seattle, Denver, Portland, Ore., and Salt Lake City.
CVS did not have to compete with another buyer because Target determined that it was the perfect fit. Discussions about the agreement took six months, people familiar to the matter told the Wall Street Journal.
Both companies are good with their terms—the only thing left is to seal the deal by receiving regulatory approval from the U.S. government. The timing for this is uncertain.
Target's pharmacy is the second acquisition by CVS in less than a month—it recently purchased pharmaceutical provider Omnicare for $10.4 billion.
Shares of CVS Health climbed by 0.7 percent to $102.88 during morning trading Monday, while Target's shares went up 1.3 percent to $80.51.
