US pharmacy giant buys pharmacies of retailer Target

CVS Health added to its powerful chain of drug stores Monday with a $1.9 billion deal to buy 1,660 pharmacies from retailer Target.

The pharmacies, located inside Target stores in 47 states, will give CVS a new channel for its retail pharmacy business as well as room to expand its chain of medical clinics, called MinuteClinics.

CVS will also partner with Target as it develops smaller "flexible format stores" to be called TargetExpress over the coming two years.

The deal "brings together two leading retailers with complementary strengths, brands and cultures to enhance the health care experience for Target guests while expanding CVS Health's retail presence in new markets, such as Seattle, Denver, Portland and Salt Lake City," CVS said.

CVS president and chief executive Larry Merlo said "there is no question that this is a win-win for both companies."

The deal came just three weeks after CVS announced the $12.7 billion acquisition of pharmacy benefits manager Omnicare to expand its services to seniors.

With about 200,000 employees, CVS is one of the country's top two pharmacy benefits managers, companies that handle prescription drug claims for the health programs of other employers and insurers.

It is also the number two drugstore operator after Walgreens by prescription drug sales, with 7,800 retail pharmacies and more than 900 walk-in medical clinics.

Analysts said the deal made sense, because Target was at best breaking even on its drugstore services and CVS can bring scale and efficiency.

Adding Target's two percent market share, said Mark Wiltamuth at Jefferies, is a "capital-efficient way to add scale and share for CVS."

Target shares rose 1.3 percent to $80.51 in late trade Monday after the deal was announced, while CVS gained 0.5 percent to $102.76.