1 of the Largest Corporate Splits in History Is Coming to Wall Street in 2028 -- It's a Stock Up 737% Since Its IPO

CVS Health (NYSE: CVS), a retail pharmacy that most people in the U.S. have shopped at for everything from daily convenience items to prescription drugs, is planning to split into two in one of the largest breakups in corporate history.

CVS announced the major shake-up earlier this month. The Rhode Island-based company became publicly traded in 1996 after its predecessor, Melville Corporation, completed a major corporate restructuring and changed its name to CVS.

Since that time, CVS stock has risen nearly 737%, which equates to compound annual growth of nearly 7.4%.

Image source: Getty Images.

What the CVS split will look like

In a press release, CVS said one of the two companies will comprise healthcare solutions, including CVS subsidiaries Aetna, CVS Caremark, CVS Specialty, Oak Street Health, and Signify Health. This company will be referred to as CVS Health for now.

The second company will comprise roughly 9,000 CVS retail pharmacies, the mail pharmacy, MinuteClinic, and the Health100 tech service business. This entity will be called CVS Pharmacy.

In this transaction, which is expected to take place in the first half of 2028 and be tax-free, shareholders will own shares of both companies.

Once the two entities are split, CVS Health's current chairman and CEO, David Joyner, will become chairman and CEO of the healthcare solutions company, while Prem Shah, currently Group President of CVS Health, will become CEO of the pharmacy company.

"Aetna, CVS Caremark and CVS Specialty, along with our value-based care and in-home health businesses, will advance together as a leading healthcare solutions provider, delivering differentiated, comprehensive benefits to clients, members and patients," Joyner said in a statement. "CVS Pharmacy will build on its position as America's leading retail pharmacy, serving as the front door to health and care in our country as the most frequently accessed consumer health touchpoint. Both companies will continue to advance innovative technology solutions to improve the healthcare experience as we deliver on our purpose to simplify healthcare, one person, one family and one community at a time."

It's a big move the market didn't initially like, with shares selling off significantly on the day of the announcement. Joyner became CEO of CVS in 2024, promising to turn the company around after it had been struggling.

At the time, following the pandemic, seniors enrolled in Medicare Advantage had begun undergoing medical procedures and seeking care at a much higher rate than CVS's insurance arm, Aetna, had projected, resulting in unforeseen, higher medical expenses.

Additionally, CVS's pharmacy benefits management (PBM) division has faced significant regulatory scrutiny over its drug pricing practices and recently reached a settlement with the U.S. Federal Trade Commission.

Since taking over, Joyner has done a good job stabilizing the company and now sees the split as the next stage of its evolution.

In the release, CVS said the split will accelerate management's priorities, including an independent capital structure and strong free cash flow; enhanced innovation, particularly in technology; and a simplified structure to better serve its stakeholders.

Will it benefit shareholders?

CVS stock sold off following the announcement, perhaps because it caught investors by surprise. After all, it's a big strategic change from a company that once focused on creating an all-in-one health solutions company.

Additionally, the company has significant debt from past acquisitions, raising questions about how it will be handled. On a conference call, CVS's CFO, Brian Newman, said both companies are expected to receive investment-grade ratings from the rating agencies and to pay attractive dividends.

Investors were also worried that no longer linking the pharmacy directly to the PBM could result in lost efficiencies. However, Joyner said these would "...be preserved in commercial agreements between the two organizations."

While many things are still unknown, the big positive I see here is that CVS is making the move from a position of strength.

"This business is a much different business from the one that's been considered three years ago, five years ago, 10 years ago, where there had been a litany of headwinds that the pharmacy just couldn't overcome," Leerink Partners analyst Michael Cherny told CNBC, adding that the pharmacy business has gained market share and seen its gross margin stabilize.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.