Walmart said to eye Humana acquisition

Walmart is in the early stages of discussions of a possible merger with health insurance giant Humana, the Wall Street Journal reported Thursday.

The potential merger would join a string of hook-ups among healthcare companies and food and drug retailers, including the pending $69 billion acquisition of Aetna by drugstore chain CVS and Albertsons’ pending acquisition of drugstore chain Rite Aid. In early March, insurance provider Cigna announced an agreement to acquire Express Scripts Holding company, the largest administrator of prescription drug benefits.

An acquisition of Louisville, Ky.-based Humana would significantly expand Walmart’s reach into healthcare, an area in which the Bentonville, Ark.-based retailer has expressed interest. The company has been expanding its in-store Walmart Care Clinics, and last year entered a partnership with Quest Diagnostics to offer in-store lab tests.

According to the Wall Street Journal, which cited people familiar with the talks, Walmart and Humana are discussing a range of options, including an acquisition. The two companies already work together to offer Humana’s customers discounts on prescription drugs through Walmart’s thousands of in-store pharmacies, the Journal reported.

Humana offers a range of health insurance products, and has a significant focus on providing private Medicare plans. This coincides with Walmart’s older demographic, the Journal noted. Humana also has its own pharmacy benefits management company, and serves 4.9 million Medicare pharmacy-plan customers.

Neil Stern, senior partner at Chicago-based retail consulting firm McMillan Doolittle, said the deal would expand Walmart’s healthcare reach.

“It allows Walmart to gain deeper access to Humana patients and probably provides access to allow Walmart to take a more active role in health management — more clinics, in-store services, etc.,” he said.

Walmart could also leverage a partnership with Humana to offer health insurance for its own workers, according to the Wall Street Journal report.

A merger could, however, raise questions about the companies limiting where consumers can obtain prescriptions, Stern noted.

Neither Walmart nor Humana could be reached for comment.

Before the CVS-Aetna merger was announced late last year, a U.S. court had blocked Aetna’s proposed acquisition of Humana, leading to speculation that Humana could be acquired by either Walgreens or Walmart.

In a research report last November, Ana Gupte, a New York-based analyst with investment firm Leerink, suggested that Humana could be readying itself for an acquisition after the company filed a “change of control” notice with the Securities & Exchange Commission that outlined plans for executives if the company was acquired. She suggested that insurance providers Cigna or Anthem — which were also blocked from merging with each other last year — could be likely candidates to acquire Humana, although she noted that either Walmart or Walgreens could step in.

“Walmart or Walgreens are also potential dark horse acquirers of Humana, given that vertical consolidation between retail pharmacy and managed care organizations appears to be in the offing,” Gupte wrote.

She cited the threat of Amazon’s entry in pharmacy and what was then speculation about the CVS-Aetna merger as potential catalysts for such deals.

Humana, which had revenues of $53.8 billion in 2017, could fetch nearly $50 billion in a buyout, according to a Barron’s report.

Asked about whether the CVS-Aetna deal and the potential acquisition of Humana by Walmart could spark further consolidation among retailers and large insurance providers, Stern said the pool of potential merger candidates is shrinking.

“With CVS/Aetna and potentially Walmart/Humana, I’m not sure how much more partnering could still happen, just based on the number of large insurers/large retailers there are,” he said.