Why Walmart may want to buy Humana

Walmart may turn to an unlikely source to attract more shoppers and fight off Amazon.Walmart is in the ...

Posted: Mar 31, 2018 5:08 PM
Updated: Mar 31, 2018 5:08 PM

Walmart may turn to an unlikely source to attract more shoppers and fight off Amazon.

Walmart is in the early stages of talks to buy the health insurance giant Humana, according to a Wall Street Journal report published late Thursday. A Walmart-Humana deal would transform America's largest retailer and shake up the health care industry.

Humana, valued at $37.5 billion, would be the largest acquisition in Walmart's history. Walmart, already one of the largest pharmacies in the country, could present itself as a one-stop shop for Humana's 14.2 million policyholders and bring in new customers with an expanded focus on health and wellness.

The deal would also allow Walmart to control health care for its employees and defend itself against Amazon as it creeps further into health care.

Health care is a "major growth sector," said Neil Saunders, managing director of GlobalData Retail, a consulting firm. "Moving onto this turf would give Walmart a whole new arena in which to expand [and] would be valuable at a time when its retail margins are under pressure."

Related: Walmart is reportedly in talks to buy Humana

Walmart's 5,300 physical stores in the United States already compete with Amazon, Target, Costco, dollar stores, traditional grocery stores and discount grocers. The company has expanded online, but its digital sales slowed last quarter, sending the stock tanking.

Walmart has maxed out its existing market base of less affluent Americans and is looking for ways to find more customers, according to Paula Rosenblum, a managing partner at Retail Systems Research.

Dollar stores have already taken away lower-income customers, and Amazon has limited Walmart's ability to attract wealthier Americans.

Related: Meet the new Walmart customer: Higher-end and digital-savvy

Rosenblum said a merger with Humana would fit into CEO Doug McMillon's strategy to bring in new shoppers and make it a more attractive place to work.

Under McMillon, Walmart has bought brands such as Jet, the online shopping site, and Bonobos. It has also raised its minimum wage in recent years, in part to fight criticism that it underpays workers.

With Humana, Rosenblum speculated that Walmart might offer health insurance for employees to retain them in a tight labor market. Walmart is the largest private employer in the country. It employs 1.5 million Americans, according to its most recent quarterly filing.

Related: Cigna agrees to buy Express Scripts for $67 billion

A takeover is only one option the companies are discussing, the Journal reported. Walmart already partners with Humana on a Medicare prescription benefit, and the companies could expand that partnership.

Humana's policyholders include millions in Medicare-related plans. Taking full control of Humana could push them to fill their prescriptions at Walmart stores and then go shopping for everyday products, said Ana Gupte, an analyst for Leerink Partners.

Scooping up Humana would also allow Walmart to delve deeper into its customers' health care needs, said Gurpreet Singh, partner in the health services sector at PwC, a consulting firm.

Access to Humana's medical data would give Walmart more insight into its customers and the people who live around its stores. If a certain community has high rates of heart disease or diabetes, Walmart could display and advertise items that address those conditions more prominently, for example.

"It would provide Walmart with better data and information on what to promote and what to provide for certain populations," he said.

Related: Amazon is already trying to disrupt health care

Buying Humana could also bolster Walmart's fledgling foray into retail health clinics in a handful of its locations.

Insurers generally employ medical professionals, such as registered nurses, to assist policyholders with basic care. A combined company could offer that to store customers as well - an enticing notion at a time when more health care is being delivered outside of hospital settings.

"In addition to selling prescription pills, Walmart could develop a pretty attractive line of business with walk-in or by-appointment clinics," said Erik Gordon, a professor at the University of Michigan's Ross School of Business.

Related: Albertsons agrees to buy Rite Aid

The potential deal is just the latest to roil the health care sector in recent months.

CVS said in December that it would buy Aetna, and Cigna announced earlier this month that it would purchase Express Scripts, a pharmacy benefits manager. Albertsons has made a bid for the roughly 2,600 Rite Aid stores that Walgreens didn't purchase.

Part of the recent merger frenzy stems from health care companies' fear that Amazon will upend the industry.

Amazon has made its own inroads. CEO Jeff Bezos announced a partnership in January with Warren Buffett's Berkshire Hathaway and JPMorgan Chase's Jamie Dimon aimed at reducing the companies' and their employees' health care costs.

Amazon has also rolled out a line of private label over-the-counter medicines and is building a business selling medical supplies to doctors, dentists and hospitals.

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Confirmed Cases: 32437

Reported Deaths: 2030
CountyConfirmedDeaths
Marion9371546
Lake3347170
Cass15867
Allen135366
St. Joseph121834
Hendricks113567
Hamilton112391
Johnson1092104
Elkhart107028
Madison58259
Porter49521
Bartholomew48634
Clark47141
LaPorte41523
Tippecanoe3803
Howard37620
Jackson3681
Delaware35936
Hancock32327
Shelby32121
Floyd31539
Boone29335
Morgan27024
Vanderburgh2532
Montgomery23317
White2288
Decatur22431
Clinton2221
Grant19521
Noble19221
Harrison18821
Dubois1852
Henry1709
Greene16824
Warrick16528
Dearborn16421
Monroe16211
Vigo1507
Lawrence14623
Miami1391
Putnam1347
Jennings1284
Orange12422
Scott1183
Ripley1136
Franklin1068
Kosciusko971
Carroll932
Daviess8416
Marshall801
Steuben802
Wayne755
Newton7410
Wabash732
Fayette714
Jasper621
LaGrange622
Washington521
Fulton471
Jay460
Randolph453
Rush452
Jefferson421
Whitley412
Clay411
Pulaski400
Owen341
Sullivan331
DeKalb331
Brown331
Starke313
Perry260
Wells260
Huntington262
Knox250
Benton250
Tipton241
Crawford230
Blackford202
Switzerland190
Fountain182
Parke180
Spencer171
Posey160
Gibson142
Ohio130
Warren121
Adams121
Vermillion100
Martin90
Union80
Pike60
Unassigned0159

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Confirmed Cases: 114306

Reported Deaths: 5083
CountyConfirmedDeaths
Cook745213455
Lake7845270
DuPage7350347
Kane5947162
Will5279264
Winnebago200152
McHenry147569
St. Clair103573
Kankakee80843
Kendall73619
Rock Island63823
Champaign5807
Madison54457
Boone41016
Sangamon33727
DeKalb3343
Randolph2644
Jackson24210
McLean21513
Out of IL2051
Stephenson1942
Ogle1932
Macon18919
Peoria1888
Clinton17817
Union1437
LaSalle14013
Whiteside13410
Iroquois1314
Coles11912
Warren1130
Unassigned1100
Jefferson10116
Knox940
Monroe9311
Grundy882
McDonough837
Lee761
Tazewell693
Cass680
Henry670
Williamson572
Marion500
Jasper457
Adams441
Macoupin431
Perry410
Pulaski410
Montgomery391
Vermilion371
Morgan341
Christian334
Jo Daviess310
Livingston312
Douglas260
Fayette203
Ford201
Jersey201
Washington180
Woodford182
Mason170
Menard170
Mercer160
Shelby161
Bureau151
Hancock150
Carroll142
Franklin120
Piatt120
Schuyler120
Crawford110
Fulton110
Bond101
Brown100
Clark100
Cumberland100
Logan100
Moultrie100
Wayne91
Alexander80
Henderson80
Johnson70
Massac70
Saline70
Effingham61
Greene50
Marshall50
De Witt40
Lawrence40
Richland30
Stark30
Clay20
Edwards20
Gallatin20
Hamilton20
Wabash20
White20
Calhoun10
Hardin10
Pike10
Pope10
Putnam10
Edgar00
Terre Haute
Overcast
69° wxIcon
Hi: 80° Lo: 63°
Feels Like: 69°
Robinson
Overcast
67° wxIcon
Hi: 77° Lo: 62°
Feels Like: 67°
Indianapolis
Overcast
68° wxIcon
Hi: 79° Lo: 64°
Feels Like: 68°
Rockville
Overcast
65° wxIcon
Hi: 79° Lo: 63°
Feels Like: 65°
Casey
Overcast
68° wxIcon
Hi: 79° Lo: 62°
Feels Like: 68°
Brazil
Overcast
69° wxIcon
Hi: 79° Lo: 63°
Feels Like: 69°
Marshall
Overcast
69° wxIcon
Hi: 79° Lo: 63°
Feels Like: 69°
More Rain Thursday
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events