VillageMD, backed by Walgreens Boots Alliance, announced Monday it will acquire Summit Health-CityMD for $8.9 billion, growing Walgreens’ reach in primary care. The move was a bold and smart one for the retail giant, one industry expert said.
Summit Health-CityMD provides primary, specialty and urgent care. Joined with primary care provider VillageMD, the combined organization will have more than 680 provider locations in 26 markets, according to a news release.
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“Summit is viewed as one of the higher quality assets in the market,” said Michael Greeley, co-founder and general partner at Flare Capital Partners, in an interview. “It’s got a very imposing kind of physician footprint, and there are just very few of-scale primary care assets.”
The announcement comes amid a wealth of merger and acquisition news, particularly in the primary care and home health space. Amazon recently announced its plan to acquire primary care provider One Medical for $3.9 billion, while CVS Health is purchasing home health provider Signify Health for nearly $8 billion. Walgreens also recently announced that it will acquire its remaining 45% stake in CareCentrix for $392 million.
And with CVS Health and Amazon taking big steps in healthcare, the Summit Health deal was both offensive and defensive for Walgreens, Greeley said.
“I think it was a great offensive move through one lens,” Greeley said. “You could also say it was a somewhat defensive move because their direct competitor CVS has made a very bold acquisition. Amazon with PillPack is nibbling around the pharmacy edges and has made some pretty interesting moves in healthcare. I do think on some level, Walgreens had to do something because they were at risk of being painted into this low growth, retail space and now they’re in a much larger, addressable or profitable part of the market.”
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Another industry expert said the deal will allow Walgreens to reach even more consumers.
“For Walgreens, this transaction expands its primary care presence and allows the company to deepen its relationship with communities and consumers,” Ellen Herlacher, principal of LRVHealth, wrote in an email.
She added that the deal is a natural next step for Summit Health, which is backed by private equity firm Warburg Pincus.
“In the first chapter, VC-backed medical groups created accessible, personalized primary care experiences,” Herlacher said. “In the second chapter, they achieved scale and entered top metro areas. And now we’re in the third chapter, where they consolidate and cement their presence by becoming the delivery arm of trusted retailers like Walgreens.”
VillageMD’s $8.9 billion purchase includes investments from Walgreens Boots Alliance and Evernorth, a subsidiary of Cigna, which will become a minority owner of VillageMD. Walgreens will invest $3.5 million through an even mix of debt and equity for the acquisition.
The purchase will combine VillageMD’s expertise in value-based care with Summit Health’s experience in providing multispecialty care, the news release stated.
“Adding our expertise and geographic coverage to VillageMD’s proven value-based primary care approach will enhance the lives of so many patients and physicians across the country, helping to lower healthcare costs and improve the health of our communities,” Summit Health-CityMD CEO Jeff Alter said in a statement.
Roz Brewer, CEO of Walgreens Boots Alliance, said the deal will greatly improve access to healthcare in the U.S.
“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,” Brewer said in the news release. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care.”
The deal is subject to customary closing conditions and is expected to close in the first quarter of 2023.
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