Walgreens, Cigna Backing VillageMD Purchase of Summit Health-CityMD

Nov. 7, 2022
The combined doctor group will be home to about 4,100 providers across the country

Two blue-chip healthcare names are teaming up to support VillageMD’s acquisition of primary, specialty and urgent care venture Summit Health-CityMD in a deal that values the latter at $8.9 billion.

Backing the proposed deal are Walgreens Boots Alliance Inc., which will invest $3.5 billion (split evenly between equity and debt) and Cigna Corp.’s Evernorth division, which is investing $2.5 billion in VillageMD preferred stock. If completed as expected early next year, the acquisition will lower WBA’s stake in VillageMD to 53 percent from about 63 percent.

“Summit Health-CityMD has been a leader in delivering coordinated, multi-specialty care for decades,” said Tim Barry, CEO and chair of VillageMD. “We are honored to work side-by-side with their 13,000 strong workforce who are passionately committed to delivering the best outcomes for millions of patients.”

Combined, the VillageMD and Summit Health organizations will operate more than 680 clinics of various stripes in 26 markets across the country and be home to about 4,100 providers. About 370 of those are Summit or CityMD locations in New York, New Jersey, Connecticut, Pennsylvania or Oregon. Joining the two organizations is the latest—and one of the most significant—in a series of deals linking providers to more traditional retail healthcare brands such as Walgreens and CVS Corp. or to insurers such Cigna and UnitedHealth Group Inc.

“Summit Health-CityMD joining VillageMD is transformational for our U.S. Healthcare segment and reinforces our intent to create greater access to quality healthcare across the care continuum,” said Walgreens CEO Roz Brewer. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care.”

Word of the proposed VillageMD-Summit combination comes a month after Brewer and her team said they had agreed to pay $392 million for the 45 percent of post-acute and home care provider CareCentrix that they didn’t already own. Walgreens has been assembling a portfolio of healthcare services businesses to bolt onto its massive retail and pharmacy footprints. With Summit in the fold, Brewer and her team expect VillageMD’s revenues to double to nearly $7 billion in 2023 while improving its profitability—which in turn will let Walgreens’ healthcare group get into the black more quickly.

Less than a month ago, Brewer lifted Walgreens’ fiscal 2025 healthcare revenue target by $1 billion to a range of $11 billion to $12 billion. With Summit, that range has popped to $14.5 billion to $16 billion. Similarly, her team’s EBITDA expectations for the group have been updated to near break-even for fiscal 2023 from a previously forecast loss of more than $200 million. By fiscal 2025, the division’s EBITDA is now expected to top $1 billion.

Shares of Walgreens (Ticker: WBA) climbed 4 percent to about $38.50 on the news Nov. 7. Those of Cigna (Ticker: CI) rose about 1 percent to roughly $325.

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