CVS-Aetna deal has $2.1B breakup fee

Mark Bertolini speaking
If CVS' deal to buy Aetna closes and CEO Mark Bertolini leaves the company, he could pocket $500 million.

CVS and Aetna have set a Dec. 3, 2018, deadline for consummating their merger, but if the deal goes south, there’s $2.1 billion breakup fee on the line.

Both of those provisions are outlined in the companies’ official merger agreement, which they filed Tuesday with the Securities and Exchange Commission. It lays out the terms of the $69 billion deal between the pharmacy giant and one of the country’s largest for-profit health insurers—and will be a particularly important document if the deal is challenged by antitrust authorities.

RELATED: 5 things to know about the CVS-Aetna deal

Here are some of the key facts to know:

  • For at least 5 years following the closing of the merger, CVS Health will maintain “Aetna” as the primary brand for the insurance businesses of CVS Health and its subsidiaries.
  • For at least 3 years following the closing of the merger, CVS Health will continue running the Aetna Foundation, maintaining its name and its charitable mission.
  • Each party has the right to extend the deadline for finalizing the deal to March 3, 2019, if all the closing conditions are met other than receiving regulatory approval. CVS can also extend the deadline even further—to June 3, 2019—under certain conditions.
  • If the merger is terminated, the circumstances that led to that outcome will determine which company pays the breakup fee. Either CVS or Aetna could have to pay the fee to the other party if it fails to get its stockholders to approve the deal or breaches the merger agreement, but CVS alone would have to pay up if it fails to achieve regulatory approval for the deal.

If the deal does close and Aetna CEO Mark Bertolini decides to leave the combined company, he could pocket $500 million, according to The Wall Street Journal. Most of that payout, the publication noted, is tied to stock or rights that he previously owned, which will increase in value with the deal. However, changes in the value of CVS shares could change the payout amount.

Per the terms of the deal, Bertolini and Aetna’s management team will remain at the helm of what will become a standalone subsidiary of CVS. Bertolini and two other unnamed Aetna executives will also be added to CVS’ board of directors.