Walmart in early talks to buy Louisville-based Humana, WSJ repor - WDRB 41 Louisville News

Walmart in early talks to buy Louisville-based Humana, WSJ reports

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LOUISVILLE, Ky. (WDRB) – Walmart is in preliminary talks to buy Louisville-based Humana Inc., the Wall Street Journal reported Thursday evening, citing “people familiar with the matter.”

If the companies can agree to terms, it would be the second time in three years that Humana – by far the biggest corporation headquartered in Kentucky – has agreed to sell itself, setting off a new round of speculation and uncertainty about some 12,500 high-paying corporate jobs in Louisville.

Wall Street stock analysts have named Walmart as a potential buyer of Humana as early as November of last year.

The two companies have been in business together for several years through a Medicare prescription drug plan that Humana sells through Walmart pharmacies.

And CVS – Walmart’s competitor in the pharmacy business – plans to buy health insurer Aetna, a rival to Humana. (Aetna’s planned purchase of Humana fell apart last year amid opposition from the U.S. Department of Justice).

“Walmart has enjoyed a tight relationship with Humana for almost 7 years,” Leerink Partners analyst Ana Gupte wrote in a research note in December, in which she speculated that the world’s largest retailer could be a dark-horse candidate to buy Humana.

The partnership steers Humana drug plan members to Walmart stores, which “drives prescription revenue and associated sale of mass merchandise,” she wrote.

Owning Humana, which specializes in the Medicare population, could help Walmart “repurpose real estate within its stores toward primary care with collocated pharmacist capabilities,” according to Gupte.

Humana, meanwhile, plans to swallow up Louisville-based Kindred Healthcare this summer in a deal that also involves a pair of private equity firms.

In December, Humana CEO Bruce Broussard told WDRB that the Kindred acquisition wouldn’t preclude Humana from entertaining its takeover offers.

He said buying Kindred doesn’t change Humana’s strategy, so it wouldn’t change the calculus of any potential buyer evaluating Humana.

“If they were interested in us before and the strategy that we articulated, then my suspicion is they will continue to be interested in the organization,” Broussard said.

Any deal would have to be approved by U.S. regulators, who could object on anti-competitive grounds. The Justice Department's opposition Aetna's purchase of Humana killed that deal.

Because Walmart is in the retail business and doesn't sell health insurance, a Walmart-Humana combination presents "not as obvious a red flag as the Aetna deal," said Timothy Hall, a University of Louisville law professor. 

But Hall said it all depends on how regulators define the "market" that would be affected by a combination of the two companies.

"It’s really going to be about the analysis of what is the market overlap and how much market power would a combined Walmart-Humana have?" he said. 

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2018 WDRB News. All rights reserved.

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