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VALUATION (Medfield Pharmaceutical session)
Consider the current sale of Oak Street Health to CVS as discussed in the attached article in Appendix B.
[a] How can you explain the purchase price by CVS of $10.6 billion (i.e., $39 per share–a 50% premium over the prior equity value of Oak Street) when they are still losing $200 million each year?
[b] How can each site of Oak Street do so well when their customers are almost all covered by Medicare and Medicaid and come from largely disadvantaged populations?
[c] How can you determine a total market value for a firm like this and what is the source of it? Would you buy more stock at the current price or sell what you have for $39 per share? Why?
