Stocks began the day in positive territory thanks to optimism over the Senate's passage of a tax bill, but declined over the length of the session, ultimately ending with mixed results. The Dow Jones Industrial Average (DJINDICES:^DJI) closed at a record high, but the S&P 500 (SNPINDEX:^GSPC) lost some ground.
Today's stock market
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Some of the recent trends in the market continued today, with retail and financial stocks leading and the sell-off in technology shares continuing. The SPDR S&P Retail ETF (NYSEMKT:XRT), up 13% since the first week of November, rose 2.3%.
Dealmaking was in the news today, with CVS Health Corporation (NYSE:CVS) confirming its acquisition of insurer Aetna (NYSE:AET), and news of a possible asset purchase by The Walt Disney Corporation (NYSE:DIS) giving that stock a boost.
CVS to acquire Aetna, but investors remain skeptical
Pharmacy giant CVS announced that it is acquiring healthcare benefits company Aetna in a massive $77 billion deal that could change the landscape of healthcare in the country for years to come. The move had been reported over the weekend, but revelation of the details evidently didn't impress investors much; Aetna shares lost 1.4% to close at $178.70 and CVS stock fell 4.5% to $71.69.
Aetna shareholders will receive $145.00 in cash and 0.8378 CVS Health shares for each Aetna share. The price values Aetna shares at $207, or about $69 billion, and Aetna debt assumed by CVS brings the total value of the deal to $77 billion.
CVS and Aetna believe that the vertical integration will open up new opportunities for healthcare services at CVS' 9,700 pharmacy locations and 1,100 MinuteClinic walk-in clinics. The company believes that there will be $750 million in annual cost savings in the combined entity, which had $221 billion in revenue over the trailing 12 months. The purchase will be financed through $4.1 billion in cash, $44.8 billion in new debt, and $21 billion in new equity issues in the transaction.
One would expect the price of shares of Aetna to rise to close to the $207 deal value, but the fact that the stock didn't could mean that the market has doubts whether the deal will get through regulatory scrutiny unscathed.
Potential Disney deal with Fox boosts shares
Shares of Disney jumped 4.7% today and those of Twenty-First Century Fox were up 2.8% after The Wall Street Journal (requires subscription) reported that talks between the two companies over a possible asset transaction are progressing and could potentially culminate in a deal before the end of the year.
Citing "people familiar with the situation," the Journal says that the talks are focused on the Twentieth Century Fox movie and TV studio, as well as certain international TV providers and U.S. cable networks. Fox is reportedly not interested in parting with Fox News, the Fox broadcast network, nor sports network FS1.
Fox has numerous movie and TV properties that could interest Disney. Disney could potentially gain rights to Marvel's X-Men movies and integrate the content with future Avenger films. The Fox library also includes Deadpool, The Martian, Home Alone, Die Hard, Planet of the Apes, Ice Age, and others that Disney could monetize through future feature films, theme park attractions, and licensing deals.
Fox is rumored to be entertaining offers from other companies as well, so today's news had Disney investors encouraged that a content deal that makes a lot of sense for the company could be imminent.
Jim Crumly owns shares of Walt Disney and has the following options: long January 2019 $80 calls on Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.