In a massive $1.9 billion deal, CVS Health Corporation will take over and re-brandTarget's in-store pharmacies. The deal allows the drug store chain to instantly add 1,660 locations in 47 states, while its MinuteClinic walk-in health care service takes over 80 Target in-store clinics.
In addition, whenever Target opens a new store with a pharmacy, it will be a CVS/Pharmacy location.
Both companies view the deal as one made in heaven. The two retailers, they says, have complementary strengths, brands and cultures. While CVS enjoys a significant overnight growth in its footprint, Target expects to benefit from the additional traffic of existing CVS Health customers.
New era of growth
"When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader health care focus and an appreciation of the rise of health care consumerism with consumer choice and accountability growing,” said Larry Merlo, CVS Health President and CEO. “This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs."
Target CEO Brian Cornell says the deal is a natural for his company, allowing it to focus on what it does best.
"At Target, we've talked a lot about the evolving preferences of our guests and this partnership demonstrates that we're committed to putting them at the forefront of everything we do," Cornell said.
More to come?
Both companies suggest there could be future strategic partnerships in the works. In a joint statement they said they will carefully evaluate and select locations for new small format Target stores with a CVS/pharmacy inside. Additionally, Target and CVS Health said they will explore new market offerings that have the potential to generate strong returns on investment and offer long-term benefits for customers.
"We operate in a rapidly changing health care and regulatory environment," said Merlo. "This requires companies like CVS Health to continually innovate, providing additional points of access, lowering costs and improving quality for both consumers and payers."
Target is the second largest retailer in the U.S., behind Walmart, but it's profits took a hit in early 2014, in the wake of a massive data breach. It eventually offered a $10 million settlement to customers whose credit and debit cards were compromised.
While the company has recovered under a new CEO, it announced in March it would streamline its operations. Part of that strategy includes elimination of several thousand jobs to cut costs.
CVS is the nation's second largest drug store chain, after Walgreens. Before this deal it operated some 7,600 stores in the U.S. so this deal is likely to make CVS larger than its competitor.