Walmart, Humana in talks

NEW YORK: US retailer Walmart Inc is in early-stage talks with health insurer Humana Inc about developing closer ties, with the acquisition of Humana being discussed as one possibility, people familiar with the matter said on Thursday.

Should the talks lead to a tieup, it would be the latest deal to bring together a retail chain and a health insurer in the last few months, following CVS Health Corp’s $69 billion deal to acquire Aetna Inc and Cigna Corp’s $54 billion deal to buy Express Scripts Holding Co.

Walmart approached Humana earlier this month and the deliberations are preliminary, two of the sources said. While the conversations have focused on new partnerships, an acquisition of Humana by Walmart is also something being discussed, the sources added.

The sources asked not to be identified because the deliberations are confidential. Humana and Walmart declined to comment.

Walmart and Humana have market capitalizations of $264 billion and $37 billion, respectively.

An acquisition of Humana would represent a significant strategic shift for Walmart, which is the world’s largest retailer and has been focused on fending off Amazon.com Inc in online shopping.

Amazon has also been looking at entering the healthcare sector. Earlier this year, Amazon, Berkshire Hathaway Inc and JPMorgan Chase & Co, said they would form a company aimed at cutting healthcare costs for their U.S. employees.

“The risks (for Walmart) of becoming entangled in the complex U.S. healthcare industry are considerable, especially at a time when Walmart is grappling with the competitive challenges of a rapidly shifting retail market,” Neil Saunders, managing director of retail consultancy GlobalData Retail, wrote in a note.

“The hammering out of any agreement, which would be Walmart’s largest ever corporate deal, would, of itself, be an enormous distraction,” Saunders added.

Walmart currently has a co-branded Medicare drug plan with Humana that steers patients to Walmart stores. The partnership offers a prescription drug plan that can save up to 20 percent in drug costs for customers.