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CVS Health agrees to buy Aetna in blockbuster deal

BY Marianne Wilson

The largest announced corporate acquisition of 2017 also has the potential to reshape the country’s health care industry.

CVS Health has agreed to acquire insurance giant Aetna Corp. for approximately $69 billion. The deal would create a health care giant composed o the nation’s third-largest health insure and a nationwide network of 9,700 retail pharmacies, 1,100-plus walk-in medical clinics and a pharmacy benefits manager with nearly 90 million plan members.

Including CVS’s assumption of Aetna’s debt, the deal will be valued at $77 billion. Once the transaction closes, expected in the second half of 2018, Aetna chairman and CEO Mark Bertolini and three Aetna directors will join the CVS Health board of directors. Aetna will operate as a standalone business unit within the CVS Health enterprise. The deal is subject to regulatory approval.

“This combination brings together the expertise of two great companies to remake the consumer health care experience,” CVS Health president and CEO Larry Merlo said. “With the analytics of Aetna and CVS Health’s human touch, we will create a healthcare platform built around individuals. We look forward to working with the talented people at Aetna to position the combined company as America’s front door to quality health care, integrating more closely the work of doctors, pharmacists, other healthcare professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers.”

The two companies said that the merger offers the potential to change how patients access care at lower cost. CVS Health said the combined company , which would offer CVS Health access to the 44.6 million people Aetna insures, would offer new opportunities to reach patients, turning CVS Pharmacy locations in spaces for wellness, clinical and pharmacy services, as well as vision, hearing, nutrition, beauty and medical equipment in addition to its current offerings.

It also will offer health services at many locations that will turn CVS Pharmacy stores into a hub for answering patient questions about their conditions, prescriptions and coverage. Both companies are also expecting the deal to offer a new approach to treating chronic diseases. The combined company will have access robust data and analytics capabilities that it said could be brought to bear on hospital readmission rates, CVS said.

Loren Trimble, CEO and managing director of AArete, a global consultancy working both with payers and providers as well as pharmacy chains, predicted more deal like this in the future.

“This merger will provide further impetus for the big health insurers to look at pharmacy if they are not already doing so,” said Trimble.

He also said that a combined CVS/Aetna may be able to provide “more personalized care/develop more personalized relationships with members, which can help with innovation in care delivery and may help reduce unnecessary care.”
 

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GNC to weigh options — again

BY Marianne Wilson

For the second time in less than two years, GNC Holdings is reviewing its alternatives.

The struggling retailer on Monday said it was not moving ahead with its previously announced plans to refinance debt that comes due in 2022, and also said it has retained Goldman Sachs and Co. as a strategic advisor to help the board “evaluate alternatives to optimize GNC’s capital structure and other alternatives to enhance shareholder value.” The company did not specify its options.

GNC said the terms and conditions related to its debt “were not sufficiently attractive to the company for GNC to move forward.” It also withdrew its plans to enter into a new senior secured term loan facility and a new senior secured asset-based revolving credit facility at this time.

“Following a thorough process, we determined that the terms offered to GNC under the potential refinancing were not in the Company’s best interests at this time,” said CEO Ken Martindale, who took the reins at GNC in September. “Our focus remains on continuing to build momentum behind our One New GNC strategy and ensuring we have the appropriate capital structure to support those efforts.”

In a release, GNC noted that it maintains a strong liquidity position, including $40.1 million in cash and cash equivalents and $246.1 million available in revolving credit. In addition, the company reiterated its full year free cash flow target of $190 million to $210 million and reconfirmed its plans to repay the remainder of its revolver in the fourth quarter.

“As we work with our advisors to review and optimize our capital structure, we are confident that our cash flow and liquidity will enable us to continue to invest behind our key initiatives to provide customers innovative, highly differentiated products and experiences, drive sales growth and improved performance, and deliver shareholder value ,” Martindale said.

GNC has struggled in recent years as sales of vitamins and nutritional supplements have skyrocketed online, with Amazon and Walmart among the company’s biggest competitors. The retailer y is working to turnaround its business with new marketing, a simplified pricing structure for customers and a revamped loyalty program.

 

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Charming Charlie to close some stores amid rumors it will file for bankruptcy

BY Marianne Wilson

The formerly high-flying Charming Charlie has come back down to earth.

The jewelry and accessories retailer announced it plans to shutter a number of underperforming stores along with its Los Angeles office, and also reduce headcount at its Houston headquarters and distribution center as part of an effort to simply business operations, improve liquidity and focus on its core strengths. The moves comes amid rumors that the chain is preparing to file for bankruptcy in the near future.

“By reducing the size and scale of our operations, we have the opportunity to stabilize the business,” said Lana Krauter, who recently was named interim CEO of Charming Charlie. “We also will be better equipped to read and react to trends and what our customers want, which had been the hallmark of our success. It’s what we are referring to as our back-to-basics strategy.”

In addition, the company said it is working with outside advisors to explore a range of alternatives “to help ensure the company has adequate sources of financing and the right capital structure to support the business on an ongoing basis.

Charming Charlie currently operates more than 375 stores in the United States and Canada. The company, which was founded in 2004 by entrepreneur Charlie Chanaratsopon, sells a wide assortment of jewelry, handbags, apparel, gifts and beauty products, with the merchandise organized by color.

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