VillageMDhealth care provider backed by walgreens, announced monday that it has signed a a definitive agreement to acquire Summit Health, a multi-specialty practice and parent company of urgent care providers CityMD.
The deal is valued at $8.9 billion and includes investments from Walgreens Boots Alliance and Evernorth, the health care subsidiary of insurer Cigna.
The acquisition marks another move in the healthcare delivery space for Walgreens. When the deal closes, which the companies expect in early 2023, the combined VillageMD and Summit Health will offer more than 680 providers in 26 markets.
“Adding our expertise and geographic reach to VillageMD’s proven value-based healthcare approach will enhance the lives of so many patients and physicians across the country, help lower healthcare costs and improve the health of our communities,” Summit CEO Jeff Alter. Health-CityMD said in a statement.
THE BIGGER EVOLUTION
Walgreens will invest $3.5 billion in a combination of equity and debt to support VillageMD’s acquisition of Summit.
As a result of the deal, Walgreens is revising its 2025 sales target for the US healthcare segment to between $14.5 billion and $16 billion, from previous range of 11 to 12 billion dollars. The company says it now expects the division to achieve positive adjusted EBITDA by the end of fiscal year 2023.
With its investment, Evernorth will acquire a minority stake in VillageMD, while Walgreens will remain the largest shareholder in the clinic, with approximately 53% ownership.
“Summit Health-CityMD joining VillageMD is transformational for our US healthcare segment and reinforces our commitment to create greater access to quality healthcare across the continuum of care,” Walgreens CEO Roz Brewer said in a statement. “This transaction accelerates growth opportunities with a strong market footprint and a broad network of primary, specialty and acute care providers and patients.”
Retail giants like Walgreens have been expand their reach in healthcare, offering more convenient services at lower costs. In October of last year, Walgreens announced that it would invest $5.2 billion in VillageMD and become the majority shareholder.
The company also recently announced plans to acquire full ownership of home care integrator CareCentrix and buy the remaining stake in specialty medicine integrator Shields Health Solutions. On an earnings call in October, Brewer said his next acquisition could be a technology asset.
This is the second deal VillageMD announced in 2022. It announced the acquisition of a long-term care management company Healthy relationships in February.