Acquisition, Divestitures and Asset Sales

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition, Divestitures and Asset Sales

Proposed Signify Health Acquisition

On September 2, 2022, the Company entered into a definitive merger agreement to acquire all of the outstanding shares of Signify Health, Inc. (“Signify Health”) for cash. Under the terms of the merger agreement, Signify Health stockholders will receive $30.50 per share in cash. The total value of the transaction is approximately $8 billion.

The proposed acquisition was approved by the Board of Directors at each of the respective companies and the Signify Health stockholders and remains subject to receipt of regulatory approval and satisfaction of other customary closing conditions. On October 19, 2022, Signify Health and CVS Health each received a request for additional information (also known as a “second request”) from the U.S. Department of Justice (the “DOJ”) in connection with the review of the transactions contemplated by the merger agreement by the DOJ under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to close in the first half of 2023.

If the merger agreement is terminated under certain specified circumstances and receipt of regulatory approval has not been obtained by such time, the Company will be required to pay Signify Health a termination fee in an amount equal to $380 million. If the merger agreement is terminated under other certain specified circumstances, including due to Signify Health accepting a superior proposal, Signify Health will be required to pay the Company a termination fee in an amount equal to $228 million.

Assets Held For Sale

Long-Term Care Business

The Company continually evaluates its portfolio for nonstrategic assets. The Company determined that its Omnicare® long-term care business (“LTC business”), which is included within the Retail/LTC segment, was no longer a strategic asset and during the third quarter of 2022 committed to a plan to sell the LTC business. The carrying value of the LTC business was determined to be greater than its fair value and, accordingly, the Company recorded a loss on assets held for sale of $2.5 billion in the three and nine months ended September 30, 2022 in the Company’s unaudited condensed consolidated statements of operations within the Retail/LTC segment. The LTC business income before income tax provision was not material for the three and nine months ended September 30, 2022 and 2021.

bswift Business

In October 2022, the Company reached an agreement to sell its wholly-owned subsidiary bswift LLC (“bswift business”) which is included in the Health Care Benefits segment. bswift offers software and services that streamline benefits and human resource administration. The sale is expected to close in the fourth quarter of 2022, subject to the satisfaction of customary closing conditions. The bswift business income before income tax provision was not material for the three and nine months ended September 30, 2022 and 2021.

Held-For-Sale Classification

The LTC and bswift businesses met the criteria to be classified as held for sale at September 30, 2022, but did not meet the criteria to be classified as discontinued operations. As a result, the related assets and liabilities were included in the separate held-for-sale line items of the asset and liability sections of the unaudited condensed consolidated balance sheet. The following table summarizes the assets and liabilities held for sale at September 30, 2022:


In millions	September 30, 2022
Assets:
Accounts receivable, net	$	248
Inventories	201
Property and equipment, net	254
Goodwill (1)	475
Deferred income taxes	130
Other	190
Total assets held for sale	$	1,498

Liabilities:
Accounts payable	$	98
Accrued expenses	94
Other	104
Total liabilities held for sale	$	296

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(1) $475 million of goodwill within the Commercial Business reporting unit was specifically allocated to the bswift business at September 30, 2022.

Divestiture of PayFlex

In June 2022, the Company sold PayFlex for approximately $775 million. PayFlex provides services to employers, their employees, and their former employees in the areas of tax-advantaged account reimbursement administration (flexible spending, health reimbursement, health savings, transit and parking), Consolidated Omnibus Budget Reconciliation Act (“COBRA”) administration and special-member billing administration. The results of this business have historically been reported within the Health Care Benefits segment. The Company recorded a pre-tax gain on the divestiture of $225 million in the nine months ended September 30, 2022, which is reflected as a reduction in operating expenses in the Company’s unaudited condensed consolidated statements of operations within the Health Care Benefits segment.

Divestiture of Thailand Health Care Business

In March 2022, the Company reached an agreement to sell its international health care business domiciled in Thailand (“Thailand business”), comprised of approximately 266,000 medical members, which was included in the Commercial Business reporting unit within the Health Care Benefits segment. At that time, a portion of the Commercial Business goodwill was specifically allocated to the Thailand business. The net assets of the Thailand business were accounted for as assets held for sale at March 31, 2022. The carrying value of the Thailand business was determined to be greater than its fair value and, accordingly, the Company recorded a $41 million loss on assets held for sale within the Health Care Benefits segment during the first quarter of 2022. The sale closed in the second quarter of 2022, and the consideration received and ultimate loss on the sale were not material.

International Health Care Benefits Renewal Rights Asset Sale

In May 2022, the Company sold the renewal rights of approximately 200,000 international medical members outside of the Americas, Thailand and India in connection with an Asset Purchase Agreement. As part of this agreement, the Company will introduce and help migrate these existing international medical members to the purchaser upon renewal. The Company expects the migration process to occur over a 16-month period between July 2022 and October 2023. The Company expects to cease writing any new or renewal business for international medical members outside of the Americas after October 31, 2022. The consideration received related to this agreement was not material.