CVS has a $2.1 billion reason to worry about its deal with Aetna falling through

pulse

December 7, 2017 6:20 PM

CVS Health has agreed to buy Aetna for $69 billion, in what's the biggest deal of 2017 so far. Should the deal not go through, there's $2.1 billion on the line.

CVS Health has agreed a deal to buy Aetna for $69 billion, in what's the biggest deal of 2017 so far.
But there's $2.1 billion on the line should the deal collapse.
That doesn't change if the deal falls apart due to the government getting involved.

CVS has a $2.1 billion reason to worry about its deal with Aetna falling through

A Securities and Exchange Commission filing submitted Tuesday outlines the terms of a termination fee, should the deal go south.

As part of the agreement, CVS will have to pay Aetna $2.1 billion if CVS's board of directors changes its mind about the deal or if the decision to merge the two companies doesn't get enough votes from shareholders. Alternatively, Aetna will have to pay CVS the $2.1 billion if its board and shareholders take the same actions.

That amount doesn't change if the merger is called off because of government regulations. If the merger were to end for antitrust reasons, CVS would still have to pay Aetna $2.1 billion.

There are a few gray areas, though. Should the merger not happen by December 3, 2018, Aetna and CVS can extend the deadline to March 3, 2019. And should the government create a new law that prohibits the deal from happening, the merger can also be called off.

Because the termination fee is $2.1 billion — roughly 3% of the total deal price — RBC Capital Markets analysts argue that it means both companies are committed to finalizing the deal.

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