VillageMD, a unit of Walgreens Boots Alliance, will acquire Summit Health-CityMD for $8.9 billion, the companies announced Monday.
Summit Health-CityMD provides primary, specialty and urgent care across the Northeastern U.S. and in Oregon. Following the acquisition, which is expected to close Jan. 1, Chicago-based VillageMD and Summit Health will have roughly 20,000 employees in more than 680 locations across 26 markets. Cigna subsidiary Evernorth is also involved in the deal; the companies did not disclose financial details.
VillageMD CEO Tim Barry called the deal an "epic milestone" in a news release.
VillageMD, historically a primary care group, wants to expand into multispecialty care and began serious conversations with Berkeley Heights, New Jersey-based Summit Health earlier this year, Barry said in an interview.
“For us, it really is just a logical extension of the journey that we’ve been on for a long time,” Barry said. “When you think about VillageMD being able to help bring these value-based care components and help accelerate the journey that Summit’s already been on, and then you think about the multispecialty capability that Summit can bring to help accelerate the journey that we’ve been on, it just starts to make all the sense in the world.”
Summit Health and CityMD merged in the summer of 2019. The following year, VillageMD bought Phoenix-based Summit Medical Group of Arizona, as the newly formed Summit Health-CityMD, backed by private equity firm Warburg Pincus, sought to focus on the New York and New Jersey markets.
Walgreens will invest $3.5 billion to support the acquisition and will now own 53% of VillageMD shares. The deal will boost the drugstore chain's earnings: Walgreens is raising its 2023 EBITDA targets to between -$50 million to $25 million, compared with the previously targeted -$240 million to -$220 million.
Barry said VillageMD is open to opportunities to expand into new markets.
Walgreens has recently sought to diversify its health segment. Last year, it spent a combined $5.5 billion to become majority owner of VillageMD and CareCentrix, a Hartford, Connecticut-based home-health benefit management firm. In September, Walgreens spent $1.37 billion to acquire the remaining stake of Shields Health Solutions, a specialty pharmacy company, after becoming a majority stakeholder last year.
Walgreens joins rival companies by seeking clinical care assets.
CVS Health is snapping up Dallas-based home health provider Signify Health for $8 billion, which would extend a portfolio that already includes health insurance, pharmacy services, virtual care and consumer goods. Amazon is acquiring San Franciso-based One Medical, a concierge primary care provider, for $3.9 billion. Federal officials are reviewing the CVS and Amazon deals.