VillageMD, a primary care provider backed by Walgreens, announced Monday it had signed a definitive agreement to buy Summit Health, a multispecialty medical practice and parent company of urgent care provider CityMD.

The deal is valued at $8.9 billion and includes investments from Walgreens Boots Alliance and Evernorth, the health services subsidiary of insurer Cigna.

The acquisition marks another move in the healthcare delivery space for Walgreens. Once the deal closes, which the companies expect in early 2023, the combined VillageMD and Summit Health will offer more than 680 provider locations in 26 markets.

"Adding our expertise and geographic coverage to VillageMD’s proven value-based primary care approach will enhance the lives of so many patients and physicians across the country, helping to lower healthcare costs and improve the health of our communities," Jeff Alter, CEO of Summit Health-CityMD, said in a statement.

THE LARGER TREND

Walgreens will invest $3.5 billion in a combination of equity and debt to support the VillageMD purchase of Summit.

Due to the deal, Walgreens is revising its 2025 sales goal for its U.S. healthcare segment to between $14.5 billion and $16 billion, from the previous range of $11 billion to $12 billion. The company says it now expects the division to achieve positive adjusted EBITDA by the end of fiscal year 2023. 

With its investment, Evernorth will gain a minority stake in VillageMD, but Walgreens will continue to be the largest shareholder in the primary care provider, with approximately 53% ownership.

"Summit Health-CityMD joining VillageMD is transformational for our U.S. healthcare segment and reinforces our intent to create greater access to quality healthcare across the care continuum," Walgreens CEO Roz Brewer said in a statement. "This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care."

Retail giants like Walgreens have been expanding their reach in healthcare, pitching more convenient services at a lower cost. In October last year Walgreens announced it would invest $5.2 billion into VillageMD and become the majority stakeholder. 

The company also recently announced plans to acquire full ownership of home-care coordination company CareCentrix and buy the remaining stake in specialty pharmacy integrator Shields Health Solutions. During an earnings call in October, Brewer said its next acquisition could be a tech asset.

This marks VillageMD's second deal announcement in 2022. It announced the purchase of chronic-care management company Healthy Interactions in February.