8-KMaterial AgreementsFinancial EventsOther Events+1

CVS HEALTH Corp 8-K Report, Material Agreement (May 2, 2023)

Filed May 2, 2023For Securities:CVS

Summary

CVS Health Corporation (CVS) announced the closing of its acquisition of Oak Street Health, Inc. on May 2, 2023. The company financed a portion of this acquisition through a new $5.0 billion, 364-day unsecured term loan facility, with the initial $5.0 billion advanced concurrently with the merger's completion. This report details the entry into the material definitive agreement for the term loan and confirms the consummation of the Oak Street Health merger. In connection with the acquisition, CVS Health is also addressing Oak Street Health's outstanding 0% Convertible Senior Notes due 2026. Holders of these notes will be offered to repurchase them at par value plus accrued special interest, or they have the right to convert them into Oak Street Health common stock, which now translates to the right to receive the merger consideration. The filing also outlines key covenants associated with the new term loan, including limitations on liens, dispositions, mergers, and a maximum consolidated indebtedness to total capitalization ratio.

Key Highlights

  • 1CVS Health completed the acquisition of Oak Street Health on May 2, 2023.
  • 2A $5.0 billion, 364-day unsecured term loan was secured and funded on May 2, 2023, to partially finance the Oak Street Health acquisition.
  • 3The term loan facility matures on April 30, 2024.
  • 4Oak Street Health's outstanding 0% Convertible Senior Notes ($920 million principal) are subject to a mandatory repurchase offer.
  • 5Holders of the convertible notes also have the right to convert them into the merger consideration.
  • 6The term loan agreement includes covenants limiting indebtedness to capitalization ratio at a maximum of 0.65 to 1.00 (potentially 0.60 to 1.00 under certain conditions).

Frequently Asked Questions

The primary purpose of this 8-K filing was to report the entry into a material definitive agreement (the $5.0 billion term loan) and to announce the closing of the acquisition of Oak Street Health, Inc.

The acquisition was financed in part by borrowings of $5.0 billion under a new 364-day unsecured term loan agreement. The full purchase price details were not disclosed in this 8-K, but the loan was used for a 'portion of the consideration'.

Oak Street Health is required to offer to repurchase all of its outstanding 0% Convertible Senior Notes due 2026 for cash at par plus accrued special interest. Holders also have the right to convert these notes into Oak Street Health common stock, which would then entitle them to receive the merger consideration.

The term loan agreement includes covenants that limit CVS Health's consolidated indebtedness to total capitalization ratio to a maximum of 0.65 to 1.00. This ratio may be automatically amended to 0.60 to 1.00 if CVS Health does not elect a 'material acquisition' step up in its existing revolving credit facilities.