Why Walmart Might Want to Acquire Humana
Walmart and Humana may be in talks about an acquisition of the health insurer by the world's largest retailer.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Late Thursday, reports began to trickle in that retail behemoth Walmart Inc. (NYSE: WMT) was in preliminary negotiations to acquire health insurer Humana Inc. (NYSE: HUM). Humana’s market cap of around $37 billion makes this a very big deal, even if the talks result in some sort of partnership between the two firms.
Walmart operates a massive pharmacy business, and it’s no secret that many of its pharmacy customers are seniors. Humana operates the second-largest Medicare Advantage program in the country and also owns its own pharmacy benefits management company. The two companies have already teamed up on Medicare Part D drug plans.
The negotiations, which neither Walmart nor Humana has so far acknowledged, might be another response by Walmart to a recent announcement by Amazon.com Inc. (NASDAQ: AMZN), JPMorgan Chase & Co. (NYSE: JPM), and Berkshire-Hathaway Inc. (NYSE: BRK-A) that the three firms would seek a solution to rising health care costs for their employees.
Amazon is also said to be looking to get into the pharmacy business, a revelation that shook up the pharmacy industry for a while in February. Walmart, which has been spending big to compete with Amazon in the online sales wars, could ill afford to let Amazon get a toehold in the prescription drug business without at least making an effort to counter such a move.
[nativounit]
Humana’s effort to merge with insurer Aetna Inc. (NYSE: AET) was derailed on antitrust grounds, and the company probably realizes now that it needs to make a similar-sized deal if it wants to remain competitive in the rapidly consolidating health care space.
Reports of the talks pushed Walmart stock up about 1.4% Thursday to a closing price of $88.97, in a 52-week range of $71.23 to $109.98. The stock’s 12-month consensus price target is $105.32.
Humana’s shares closed up about 0.5% at $268.83, after jumping to more than $271 when the reports first appeared. The stock’s 52-week trading range is $205.19 to $293.35, and the 12-month price target is $299.11.
[recirclink id=452717]
[wallst_email_signup]
Contact [email protected] for any questions or corrections.
Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
