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CVS Stock Slips on Report That Judge Will Rule Against Aetna Merger

By Josh Nathan-Kazis

Updated June 11, 2019 12:51 p.m. ET

Shares of CVS Health slid Tuesday after the New York Post reported that people close to the company believe a federal judge is preparing to rule against its already-completed $69 billion acquisition of the health insurance firm Aetna.

Last week, at a courthouse in Washington, D.C., Judge Richard Leon convened unusual hearings to review a decision by the Justice Department that approved the deal, which closed last November. Closing arguments are scheduled for this summer.

The New York Post, in a story posted online on Monday evening, quoted an unnamed person, said to be “working with CVS and Aetna,” who said that the judge would block the merger.

In a statement to Barron’s on Tuesday, CVS and Aetna batted away the story.

“CVS Health and Aetna have been one company since the deal closed in November 2018, and the combined entity is already showing progress toward its goal of transforming the consumer health experience,” said a company spokesman, T.J. Crawford. “We won’t be distracted by unfounded rumors and speculation.”

The back story. CVS and Aetna merged, with Justice Department approval, in 2018. This year, Leon, who sits on the federal district court in Washington, decided to hold hearings to allow witnesses to testify against the merger, as The Wall Street Journal reported in April. The hearings are unusual, given that the merger has already been completed.

Shares of CVS are down 31.4% since Nov. 28, the day the merger closed. The S&P 500 is up 5.2% over the same period.

What’s new. On Monday evening, the New York Post reported that Leon appeared to be planning to scuttle the deal, citing “sources close to the health-industry giants.”

The story ran on the front page of the Post’s business section on Tuesday morning. It was illustrated with a graphic depicting the judge sabotaging railroad tracks with a crowbar, with a locomotive bearing the logos of CVS and Aetna approaching.

“I think Leon rules against us,” a person the Post described as working with the health care company told the paper.

No other outlets have matched the Post’s reporting. In December, the Post reported that unidentified people “close to the case” thought that Leon would issue an order blocking the merger at a hearing that month.

The December story quoted a “source close to the case” saying that they expected the judge “to issue some kind of an injunctive order to keep them from integrating.” Leon didn’t block the merger, though he did require the combined company to keep some operations separate during a review period.

Meanwhile, investors are holding tight. CVS stock was down 1.6% in Tuesday afternoon trading, to $54.17 per share.

Looking ahead. All uncertainty about what the judge plans to do should be cleared up by midsummer, after closing arguments, when the judge is expected to issue a decision.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com