CVS expects ‘meaningful’ tax benefit from Signify acquisition

CVS Health Corp (CVS.N) said on Tuesday it expects “meaningful” tax benefits from its $8 billion purchase of home healthcare services company Signify Health (SGFY.N).

CVS, which runs pharmacies, pharmacy benefits manager and the Aetna insurance plans, said on Monday it would pay $30.50 per share, or about $7.6 billion in equity, as well as about $400 million in equity appreciation rights for Signify.

Shares of Signify, which has a network of 10,000 clinicians who provide home-based assessments of patient health and social needs, were trading at $28.80, while CVS shares slipped marginally to $99.15.

CVS anticipates around $1.50 per share in tax benefit from the deal due to the transaction structure, CVS Chief Financial Officer Shawn Guertin said on a conference call on Tuesday, adding that the company could also see some “modest” synergy benefits.

The management of the two companies were positive about not losing Signify customers.

“It’s always prudent to make some customer loss provision in your modeling just in terms of the financial benefit, and we’ve maintained that practice here. but nothing should be construed from that,” Guertin said. With the new acquisition, CVS plans better collaboration between Signify and its other businesses.

Analysts have generally been positive about the deal but have said client retention and potential synergies from the deal would be key issues to look for.

“We see risk to Signify’s revenue stream from competitors if the company is no longer independent,” J.P. Morgan analyst Anne Samuel said in a note, but added that similar concerns were also made when CVS acquired Caremark more than a decade ago and yet Caremark is still the largest pharmacy benefit manager to other health insurers.