The world's largest retailer is in early stage talks to buy health insurer Humana (HUM) - Get Report , according to a report from The Wall Street Journal. A Walmart spokesman said via email the company does not comment on rumors and speculation.
Walmart boosting its healthcare options won't come cheap.
"Assuming a 30% premium to Humana's adjusted stock price and an all-cash deal, we estimate a $50 billion equity takeout with a total transaction value of about $54 billion net of debt and cash," says Jefferies analyst Dan Binder. "While cost out synergies might be nominal given the very different businesses, the biggest opportunity would be to drive incremental traffic and sales at Walmart as it leverages data and incentivizes customers to fill prescriptions at Walmart pharmacies. This should also result in add-on sales with each incremental trip it is not getting today."
Walmart has been wheeling and dealing under CEO Doug McMillon, who moved quickly to buy online retailer Jet.com for $3.3 billion in 2016. Since then, McMillon has scooped up online apparel brands to help build out Walmart's assortment. But with a flurry of vertical deals in retail such as CVS Health (CVS) - Get Report buying Aetna (AET) , McMillon may be tweaking his strategy a bit.
"We are trying to mostly build the assortment, a customer is looking to us for not just value but they want to have a wide selection," McMillon told TheStreet in an interview last November when asked about his M&A strategy. "We are focused on busy families, so moms are important-we want to make every day easier for busy families."
Unsurprisingly, the speculation on Walmart's possibly big play comes in the healthcare space. Amid the impending boom in retiring babyboomers and millennials searching for one-stop shops for their daily needs, healthcare M&A has been red-hot in 2018. Announced healthcare transactions have touched about $156 billion this year, according to Bloomberg data.
"You will see consolidation in technology, you will see consolidation in healthcare," long-time Stifel Financial Group CEO Ron Kruszewski told TheStreet on Friday. Stifel is a major player in the M&A advisory market. "The intersection of healthcare and technology is going to be a hot area going forward."
Watch a clip of TheStreet's interview with Walmart's McMillon below.