8-KMaterial AgreementsExhibits & Filings

CVS HEALTH Corp 8-K Report, Material Agreement (Jan 6, 2011)

Filed January 6, 2011For Securities:CVS

Summary

CVS Health Corp. (CVS) announced on December 30, 2010, its entry into a definitive Agreement and Plan of Merger with Universal American Corp. This transaction involves CVS Caremark Corporation acquiring Universal American's Medicare Prescription Drug Business. The deal structure includes a merger where Universal American will survive as a subsidiary of CVS Caremark, preceded by a 'Split-Off' where Universal American will transfer its non-Medicare Prescription Drug businesses to a new entity, NewCo. Investors should note the financial components of the deal, including an initial aggregate cash consideration of $1.25 billion, subject to adjustments based on Universal American's excess capital and debt. The transaction is contingent upon shareholder approval from Universal American (requiring 66 2/3% of outstanding common stock), regulatory approvals, and other customary closing conditions. Significant shareholders, representing approximately 55% of Universal American's stock, have entered into voting agreements to support the merger, providing substantial certainty to the deal's progression.

Key Highlights

  • 1CVS Caremark to acquire Universal American's Medicare Prescription Drug Business through a merger.
  • 2Transaction involves a 'Split-Off' where Universal American's non-Medicare businesses will be transferred to a new entity, NewCo.
  • 3Initial aggregate cash consideration is $1.25 billion, subject to adjustments for excess capital and debt.
  • 4Deal requires approval from 66 2/3% of Universal American's outstanding common stock.
  • 5Key Universal American shareholders, holding ~55% of stock, have signed voting agreements to support the merger.
  • 6Transaction is subject to customary closing conditions and regulatory approvals, including antitrust.
  • 7A termination fee of $36 million is stipulated if the merger agreement is terminated under certain circumstances.

Frequently Asked Questions

While not explicitly stated in this 8-K, the acquisition strongly suggests CVS Caremark is looking to expand its presence and capabilities within the Medicare Prescription Drug benefit space. This move likely aims to enhance its market share, leverage synergies, and capture growth opportunities in a significant segment of the healthcare market.

Universal American's non-Medicare Prescription Drug businesses will be separated into a newly formed company called NewCo. Shareholders of Universal American will receive shares in NewCo as part of the merger consideration. This structure allows CVS Caremark to acquire the targeted Medicare business while enabling Universal American's other operations to continue as a separate entity.

The total value is composed of cash and stock. The initial aggregate cash consideration is $1.25 billion, which will be adjusted based on Universal American's excess capital in Pennsylvania Life Insurance Company and its outstanding debt and other amounts. Additionally, Universal American shareholders will receive shares of common stock in NewCo.

The merger is subject to several critical conditions, including the approval of at least 66 2/3% of Universal American's outstanding common stock, the successful completion of the 'Split-Off' of non-Medicare businesses, receipt of all necessary regulatory approvals (including antitrust clearance), and other customary closing conditions.