CVS completes acquisition of Target pharmacy and clinic business

Target Corp. expects to net $1.2 billion after taxes for the sale of its pharmacy and clinic businesses to CVS Health Corp.

The $1.9 billion acquisition closed on Wednesday, the companies said.

Target said fourth-quarter sales, as a result, will be down $500 million, but will not affect profits before taxes, and the company expects a pretax gain of $575 million to $775 million that will not be included in earnings per share. It said some of the $1.2 billion will be used for stock repurchases.

CVS acquired Target's 1,672 pharmacies in 47 states and will operate and rebrand them as CVS/pharmacy. Seventy-nine of the clinics will be rebranded as Minute Clinics. CVS also will open up to 20 new clinics in Target stores within three years.

"Today's milestone in our relationship with CVS Health is an important step in driving Target's strategic priorities forward while giving our guests easy access to industry-leading health care services," Chief Executive Brian Cornell said in a statement.

The acquisition will allow Target to advance its commitment to wellness, one of its signature categories.

Target will drop its pharmacy rewards program and replace it with a CVS loyalty program, although no details were provided about the new program. Target is sending its pharmacy reward customers a 5 percent off coupon in the mail this month as a gesture of thanks.

Target's pharmacy business brought in about $4.2 billion, or about 6 percent of its $73 billion in annual revenue. Executives acknowledged that it has not been profitable in recent years.

As part of the deal, Target hopes to take advantage of CVS' expertise with smaller urban stores. Target pharmacies and clinics will transition to CVS branding within six to eight months.

John Ewoldt • 612-673-7633