By Carl O'Donnell
(Reuters) - CVS Health Corp (N:CVS) is moving closer to a more than $66 billion cash and stock deal to buy health insurer Aetna Inc (N:AET) that could be announced as early as Monday, a source familiar with the matter said on Thursday.
The companies are in advanced stages of negotiating a deal that would value Aetna at between $200 and $205 per share and would be comprised mainly of cash, according to a Wall Street Journal report.
Shares of both companies rose on the news, with the enhanced cash component viewed as a positive surprise. CVS shares were up 3.9 percent and Aetna gained 1.3 percent.
Jeff Jonas, portfolio manager for Gabelli Funds, said the reported price was a bit less than he had expected.
"The bigger deal is if they're going to be paying mostly cash it would be much more accretive to CVS," he said.
"Initially I'd been thinking anywhere from a third to a half in stock and it's a pretty depressed stock price. This is actually much more positive than I thought," added Jonas, whose fund holds both stocks.
Sources told Reuters earlier this month that the deal would value the company at more than $200 per share.
The deal would combine CVS, one of the largest U.S. pharmacy benefits managers (PBMs) and drugstore chains, with Aetna, one of the oldest health insurers, whose far-reaching business ranges from employer healthcare to government plans nationwide.
Healthcare consolidation has been a popular route for insurers and pharmacies, under pressure from the government and large corporations to lower soaring medical costs.
PBMs negotiate drug benefits for health insurance plans and employers, and have in recent years taken an increasingly aggressive stance in price negotiations with drugmakers.
They often extract discounts and after-market rebates from drugmakers in exchange for including their medicines in PBM preferred formularies with low co-payments.
A tie-up with Aetna could give CVS more leverage in its price negotiations with drug makers.