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Approval of the CVS-Aetna merger should have been good news for the companies; then CVS abruptly lost $6 billion in market capital.
Investors were apparently concerned about potential earnings and efficiency in the merged companies, but there was a bigger problem. The stock market itself crashed, falling to its lowest start for an October in ten years.
They say timing is everything, and these are rough times for the CVS-Aetna merger. Federal regulators have approved the deal, but there are major hurdles ahead.
It's been ugly on Wall Street, where investors are jumping out faster than anybody wants to believe. Analysts point to rising interest rates, but other factors are looming.
For its part, CVS will take on about $8 billion of Aetna debt. The pharmacy giant will also finance the merger, and it does not expect significant savings for at least two years.
On the other hand, the merged companies will become the only firm in the United States to combine pharmacies, a benefits manager, and a health insurer. After the Department of Justice approved on Oct. 10, the stock rose about $1 billion overall.
That was before the $6 billion drop the next day.
New York Uncertainty
Meanwhile, New York has raised "significant concerns" about the merger.
The New York Post reported that state regulators may pose a bigger hurdle than the feds. About six percentage points of Aetna's business comes from New York, the newspaper said.
It's not likely that New York will derail the whole deal, but it could leverage more concessions for the state or consumers there.