By Lucinda Shen
October 27, 2017

Following reports that CVS Health planned to acquire Aetna in the hopes of staving off Amazon, shares of the drugstore giant still slid roughly 3.3% in trading Friday, falling to their lowest point since about early 2014.

Meanwhile, shares of Aetna also slid 2% to about $175 in trading Friday, after initially rising to about $180 per share a day earlier. That leaves Aetna shares below the $200 per share bid that the Wall Street Journal said CVS has offered to the company.

It’s typical for shares of the acquiring company to drop following rumors of an acquisition, with investors worrying about how a potential merger will proceed.

What may also be weighing on the mind of CVS investors: Amazon’s own foray into the pharmaceutical business. The St. Louis Post-Dispatch reported Thursday that Amazon had won regulatory approval to wholesale pharmaceuticals in 12 states.

Still, Wall Street appears to be cheering what may become the biggest acquisition of the year.

“A potential combination would diversify CVS profit streams ahead of an Amazon entry and set the stage for a new healthcare-retail delivery model,” wrote Morgan Stanley analysts, led by Ricky Goldwaser.

CFRA analysts, meanwhile, said the combination made sense.

“It provides CVS with a greater ability to incentivize Aetna’s 23 million health plan participants to utilize Caremark’s mail order system or CVS retail stores,” CFRA’s Joseph Agnese wrote.

Cowen analysts said that the deal has its merits, though it is also risky.

“We are concerned that CVS may be rushing into a deal over an Amazon threat that is only beginning to be articulated and will still take years to effect,” the team, led by Charles Rhyee, wrote in a Friday note. “We believe CVS still has time to move more gradually toward being a healthcare provider.”

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