VillageMD Set to Acquire Summit Health in $9 Billion Deal

VillageMD – the care provider backed by Walgreens Boots Alliance Inc – is set to purchase multispecialty medical care provider Summit Health in a deal valued at almost $9 billion, as the pharmacy chain seeks to broaden its healthcare horizons.

The announcement comes amid a flurry of mergers and acquisitions in the primary care sector, including Amazon’s acquisition of One Medical for nearly $4 billion in July and CVS Health’s $8 billion deal for the takeover of Signify Health last month. 

Evernorth – a division of one of the world’s largest health insurance companies, Cigna Health – is also investing in the deal and will eventually own a minority stake in VillageMD. The companies are referring to this partnership as a “strategic collaboration.”

Summit Health was formed in 2019 as a result of a merger between Summit Medical Group and CityMD, an urgent care provider located in the metropolitan area of New York City. It currently has more than 350 locations across the U.S. In addition to running independent physician-led medical groups, Summit Health also oversees the operations of CityMD, which provides alternatives to visits to hospital emergency departments.

The deal, which was first announced at the end of October, is the latest in a string of acquisitions in the primary care space by large companies that want to get more involved in healthcare. Walgreens in particular has been very busy in this regard, having established a healthcare division in the U.S. that includes Shields Health Solutions, VillageMD and home healthcare company CareCentrix, among others.

When the retail giant initially invested in VillageMD in 2020, its ownership stake was only 30%. A little over a year ago, it invested an additional $5.2 billion into the company, raising its ownership stake to 63% – an increase of over 100%. 

In collaboration with VillageMD, Walgreens intends to establish 1,000 primary care clinics within its own pharmacies in the next five years. The company is also planning to establish distribution hubs in various parts of the U.S., where automated technologies will be used to fill prescriptions and then deliver them to local pharmacies, freeing up more time for pharmacists to interact with customers.

Once combined, VillageMD and Summit will have nearly 700 provider locations in over 25 markets. Summit CEO Jeff Alter said in a statement, “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. We are incredibly excited about the potential of these combined companies.”

Walgreens will put $3.5 billion into the deal, $1.75 billion of which will come from equity and the remaining $1.75 billion will come from debt. Following the announcement of the partnership, Walgreens increased its target revenue for the healthcare sector in the U.S. from $14.5 billion to $16 billion. Furthermore, the company also revealed that it expects a positive adjusted EBITDA by the end of the next fiscal year.