What's going on?
According to reports from the Wall Street Journal last week, Walmart is holding preliminary talks to acquire US health insurer Humana, in what would potentially mark another major acquisition this year in the health insurance sector…
What does this mean?
Walmart is the fourth-largest pharmacy operator in the US, and Humana helps manage everyday people’s health insurance and pharmacy benefits, i.e. their services could complement one another. Walmart’s apparently looking to sweep up Humana as the Arkansas-based retail giant has expanded its pharmacy and health services in past years. With Humana under its wing, Walmart could better market its urgent care and pharmaceutical services to Humana subscribers and harness Humana’s patient data (e.g. there may be a growing number of high cholesterol patients) to better target its food and grocery offering.
There are some concerns over this acquisition, however, as Walmart already has a lot of debt and Humana won’t be a cheap company to acquire.
Why should I care?
For markets: The health insurance space has been hot for deals lately.
Aetna was just recently bought by CVS in a $69 billion deal (in what was 2017’s biggest acquisition), while in March Express Scripts (which helps manage insurance for pharmaceutical drugs) agreed to be bought out by US insurer Cigna for $54 billion. If it comes to fruition, Walmart’s acquisition of Humana would just be the next big deal in the world of health insurance.
The bigger picture: Walmart seems to be going more Amazon…
As the “Amazon effect” threatens to decimate traditional retailers, Walmart’s spent billions in the last few years to boost its ecommerce offering through the acquisition of companies like Jet.com and Moosejaw. If it goes through with this deal, it may be a pre-emptive strike against Amazon, which is reportedly considering selling prescriptions online and has agreed a new healthcare venture with JPMorgan and Berkshire Hathaway.