Glenview Capital says it's not pushing CVS to break up

CVS Health is conducting a strategic review of options, including possibly breaking up the company, as it faces headwinds to its retail business and its insurance operation, Aetna, sources told the The Wall Street Journal on Monday.

The healthcare company's board of directors retained bankers to facilitate the review, WSJ reported, citing sources with knowledge of the matter. No decision is imminent and it's possible there won't be changes to CVS' business, the sources said.

Reuters first reported that CVS tapped bankers to explore options that could include a breakup of the company to separate its retail and insurance units.

However, Glenview Capital said in a statement that's not behind the potential breakup plan. The hedge fund met with CVS officials on Monday, and reports about the strategic review quickly followed.

In a statement posted Tuesday, Glenview said the "dialogue is ongoing but is private and should remain so."

"Glenview and CVS Leadership are engaged in good faith and constructive conversations through which Glenview is offering suggestions to enhance the governance, culture, efficiency, sustainability and growth of CVS Health," according to the statement

"Press reports have represented that Glenview is pushing for a break-up of CVS Health – this is false," the statement continues. "Our goals are those shared by all stakeholders – to work together to strengthen CVS's culture and operating performance to enhance value for customers, associates and shareholders alike." 

On Monday, a key hedge fund investor for CVS Health met the company's top brass in a move that signals a potential activist approach going forward, sources told The Wall Street Journal in an earlier story.

CVS executives reportedly met with Glenview Capital Management to discuss potential improvement strategies as the healthcare giant continues to navigate choppy financial waters. Glenview's founder Larry Robbins has "established a large position in CVS," the WSJ reported, and the company accounts for about $700 million of the trust fund's $2.5 billion war chest.

Glenview holds around 1% of outstanding CVS shares, according to the article.

WSJ's sources said the meetings Monday indicate that Robbins believes CVS can right the ship and that he will be able to push its leadership toward new approaches. Robbins has also played the role of activist investor in other instances, including when he recently put pressure on Tenet Healthcare to remove four of its board members.

The WSJ also reported that CVS informed employees on Monday that it would initiate layoffs as part of its broader cost-costing efforts. The outlet reviewed an internal memo that said the job cuts would impact less than 1% of CVS workers, with most of those effected to be notified during this week.

A spokesperson confirmed to WSJ that about 2,900 jobs are impacted, and they are largely corporate positions.

CVS first announced the cost-cutting initiative during its second quarter earnings call in early August. CEO Karen Lynch said the company identified $2 billion in potential savings, with $500 million set to be generated this year. 

Much of the financial challenges CVS has faced have stemmed from its Aetna division, which was hit hard by elevated utilization in the Medicare Advantage market. These issues led the company to fire Aetna President Brian Kane, with Lynch taking on a greater role the in running the insurer's day-to-day business.

Executive Editor Heather Landi contributed to this reporting.