What is the primary purpose of this 8-K filing?

This filing serves as a Regulation FD disclosure to inform investors about CVS Health's agreement to purchase Target's pharmacy and clinic businesses. It details the terms of the asset purchase agreement, financing plans, and the expected financial impact on CVS Health.

How will CVS Health finance this acquisition, and what is the impact on its debt?

CVS Health will finance the acquisition with additional debt. This, combined with the planned Omnicare acquisition, is expected to raise its Adjusted Debt to EBITDA leverage ratio to approximately 3.2x.

What is CVS Health doing to mitigate the impact of increased debt?

To manage its leverage ratio and work towards its target of 2.7x, CVS Health is reducing its 2015 share repurchase guidance by $1 billion. This action also has a minor impact on its earnings per share guidance.

When is the transaction expected to close, and what are the conditions?

The transaction is subject to regulatory approval and other customary conditions. The closing is expected to occur on the later of the receipt of regulatory approval or September 10, 2015. An outside termination date for the agreement is March 15, 2016, with a potential extension to September 15, 2016, under specific circumstances.

What is the projected financial impact of this deal on CVS Health's earnings?

The transaction is expected to be approximately 6 cents dilutive to CVS Health's Adjusted Earnings Per Share in 2016. However, it is projected to become accretive starting in 2017, with an estimated 10 cents accretion, and at least 12 cents accretive in 2018 and beyond. These estimates exclude integration and one-time transaction costs.

CVS 8-K: Regulation FD — Jun 15, 2015

Summary

CVS Health Corporation (CVS) announced on June 12, 2015, through a subsidiary, an Asset Purchase Agreement to acquire Target Corporation's pharmacy and clinic businesses for $1.887 billion in cash. This strategic acquisition will allow CVS to operate pharmacies and clinics within Target stores on a long-term, exclusive basis, significantly expanding its retail footprint. The deal is subject to regulatory approval and customary closing conditions, with an expected closing by September 10, 2015, or a later outside date of March 15, 2016. Financially, CVS plans to fund this acquisition with additional debt, which, combined with the planned Omnicare acquisition, will increase its Adjusted Debt to EBITDA leverage ratio to approximately 3.2x. To manage this increased leverage and target a ratio of 2.7x, CVS is reducing its 2015 share repurchase program by $1 billion, impacting its 2015 Adjusted EPS guidance by approximately one cent and 2016 by approximately four cents. While the transaction is expected to be dilutive to Adjusted EPS in 2016 (around 6 cents, including the reduced buyback), CVS anticipates it will become accretive in 2017 (approx. 10 cents) and further in 2018 and beyond (at least 12 cents).

Key Highlights

1CVS Health to acquire Target's pharmacy and clinic businesses for $1.887 billion cash.
2Acquisition grants CVS long-term, exclusive rights to operate pharmacies and clinics within Target stores.
3Deal subject to regulatory approval and customary closing conditions, with an expected closing by September 10, 2015.
4Transaction will be financed with additional debt, increasing Adjusted Debt to EBITDA leverage to approximately 3.2x.
5CVS reducing 2015 share repurchase guidance by $1 billion to manage leverage.
6Reduced share repurchases to lower 2015 Adjusted EPS guidance by ~1 cent and 2016 by ~4 cents.
7Acquisition expected to be ~6 cents dilutive to Adjusted EPS in 2016, but accretive by ~10 cents in 2017 and 12+ cents thereafter.

CVS HEALTH Corp 8-K Report, Regulation FD Disclosure (Jun 15, 2015)

Summary

Key Highlights

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