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How CVS’s Acquisition of Target’s Pharmacies Could Threaten C-Stores

Larger deal has hidden format-blurring, convenience-encroaching implications

WOONSOCKET, R.I. & MINNEAPOLIS – In a deal that will affect both the convenience-store and drug-store channels, CVS Health Corp. and Target Corp. have announced that they have entered into a definitive agreement for CVS Health to acquire Target’s pharmacy and clinic businesses for approximately $1.9 billion. CVSHealth Target

Through this agreement, CVS Health will acquire Target’s more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services.

Target’s nearly 80 clinic locations will be rebranded as MinuteClinic, and CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction.

The new clinics will be part of CVS/MinuteClinic’s plan to operate 1,500 clinics by 2017.

In addition, CVS Health and Target plan to develop five to 10 small, flexible-format stores over a two-year period following the deal close, which will each be branded as TargetExpress and include a CVS/pharmacy.

Target and CVS Health will carefully evaluate and select locations best-suited for new small-format Target stores with a CVS/pharmacy inside.

Additionally, Target and CVS Health will explore innovative, new-market offerings that have the potential to generate strong returns on investment and offer long-term benefits for customers and communities.

This transaction will allow Target to continue offering this traffic-driving business in its stores and deliver a differentiated experience in support of its wellness efforts.

The transaction enables CVS Health to reach more patients, adding a new retail channel for its offerings, and expanding convenience options for consumers.

This strategic relationship brings together two retailers with complementary strengths, brands and cultures to enhance the health care experience for Target customers while expanding CVS Health’s retail presence in new markets, such as Seattle, Denver, Portland and Salt Lake City, the companies said.

“We operate in a rapidly changing health care and regulatory environment,” said Larry Merlo, CVS Health president and CEO. “This requires companies like CVS Health to continually innovate, providing additional points of access, lowering costs and improving quality for both consumers and payors.”

Woonsocket, R.I.-basedCVS Health has 7,800 retail drugstores, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members and expanding specialty pharmacy services.

Minneapolis-based Target has 1,795 stores.

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