Woonsocket, R.I. -- CVS Caremark Corp. said Friday it will pay $1.25 billion to buy Universal American Corp.'s Medicare prescription drug services unit. The deal will more than double the size of the chain’s Medicare drug business.
CVS said it pursued the deal because with the country's population aging, a growing percentage of Americans will get their prescription drug coverage from Medicare.
Universal American serves about 1.9 million people in the Medicare Part D federally subsidized prescription benefit program for Medicare recipients, while CVS serves 1.2 million.
CVS said the deal is expected to close in second quarter 2011 and will add to its earnings per share within a year. The agreement is contingent on approval by Universal American shareholders.
Under the agreement, CVS will acquire all stock in Universal American and give Universal American's shareholders 100% of a new public company that will own Universal American's Medicare Advantage and traditional insurance businesses. The new company will have about $640 million in cash and no debt, Universal American said.