CVS Deal To Buy Oak Street At $39 Per Share Brings Arbitrage Opportunity, Says StoryTrading's Rabizadeh

Healthcare giant CVS Health Corp. (NYSE: CVS) announced on Wednesday a definitive agreement to buy primary healthcare provider Oak Street Health Inc. (NYSE: OSH).

What Happened: CVS said it would buy Oak Street in an all-cash deal valued at $39 per share, representing an enterprise value of about $10.6 billion. This per-share price represents a 15.8% premium over the target company’s closing price of $33.68 on Tuesday.

See Also: Best Healthcare Stocks

Incidentally, reacting to a Wall Street report of a potential deal, Oak Street shares ended Tuesday’s session 29.74% higher. At one point in the session, the stock hit an intraday high of $34.63.

The purchase price is about 50.2% higher than Oak Street’s closing price of $25.96 on Monday — the session before the rumor broke out.

“Combining Oak Street Health’s platform with CVS Health’s unmatched reach will create the premier value-based primary care solution,” said CVS Health President and CEO Karen Lynch.

The deal is expected to close in 2023. By 2026, CVS expects Oak Street will likely contribute $2 billion in adjusted EBITDA and synergy potential of $500 million over time.

Arbitrage Opportunity: StoryTrading founder Ben Rabizadeh said there is an arbitrage opportunity available, given Oak Street is trading under $35.

He also flagged Cano Health Inc. (NYSE: CANO), Talkspace Inc. (NASDAQ: TALK) and DarioHealth Inc. (NASDAQ: DRIO) as sympathy play.

According to Benzinga Pro data:

• Oak Street traded 3.92% higher, at $35, in premarket trading on Wednesday.
• Cano surged close to 10%, to $1.89.
• Talkspace rose 2.35%, to $0.87.
• DarioHealth rose 3.47%, to $5.97.
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