Walgreens-backed VillageMD to buy Summit Health in $9 billion deal

By Leroy Leo

(Reuters) - Primary care provider VillageMD, which is backed by Walgreens Boots Alliance Inc, is buying urgent care provider Summit Health in a deal valued at $9 billion, as the second-largest U.S. pharmacy chain expands its healthcare footprint.

The deal adds to the rising trend of big U.S. companies expanding into the healthcare business this year. Amazon in July announced a $3.5 billion acquisition of primary care operator 1Life Healthcare Inc, while CVS Health Corp said it would buy Signify Health for $8 billion.

Private equity firm Warburg Pincus-backed Summit Health runs a physician-run medical group and operates CityMD, an alternative to hospital emergency department visits.

"For Summit, it is to accelerate their path towards value-based care and for Village to enjoy the benefit of more integrated multi-specialty care," VillageMD Chief Executive Officer Tim Barry told Reuters in an interview.

The sector is seeing a shift towards value-based care - where healthcare providers are reimbursed based on patient outcomes instead of each test or procedure - as it helps reduce costs.

Together, VillageMD and Summit Health will operate in more than 680 locations.

The deal has an equity value of $7 billion and VillageMD will take on $1.9 billion in net debt from Summit Health.

Walgreens said on Monday it will invest $3.5 billion through an even mix of debt and equity to support the acquisition, which is expected to close in the first quarter of 2023. It will be the largest shareholder in the combined company, with an about 53% stake.

The deal will also feature investment from health insurer Cigna Corp's healthcare unit Evernorth, in exchange for a minority stake in the entity.Walgreens raised its fiscal 2025 sales goal for the U.S. healthcare business to between $14.5 billion and $16 billion, from $11 billion to $12 billion previously, to account for the deal.

The company had invested $5.2 billion last year to raise its stake in VillageMD to 63% from 30%.

(Reporting by Leroy Leo in Bengaluru; Editing by Devika Syamnath and Sriraj Kalluvila)

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