Walmart Inc. is in preliminary talks to buy insurer Humana Inc., according to people familiar with the matter, a deal that would mark a dramatic shift for the retail behemoth and the latest in a recent flurry of big deals in health-care services.

It isn’t clear what terms the companies may be discussing, and there is no guarantee they will strike a deal. If they do, the deal would be big: Humana currently has a market value of about $37 billion.

It also would be Walmart’s largest deal by far, eclipsing its 1999 acquisition of the U.K.’s Asda Group PLC for $10.8 billion. Walmart, which in addition to being the world’s biggest retailer is also a major drugstore operator, has a market value of about $260 billion.

The two companies are discussing a range of options, including an acquisition, one of the people familiar said. Shares of Humana surged 10% to $297 in after-hours trading after The Wall Street Journal first reported the talks. Walmart shares slipped 1% to $88.10 in late action.

Should there be a deal—and should regulators and shareholders bless it—it would transform Walmart overnight into one of the nation’s largest health insurers. It would immerse the company in a complicated industry, one that continues to evolve eight years after the Affordable Care Act was enacted and as Washington remains deeply divided over health-care policy.


The talks come as health-service providers are rapidly pairing off and retailers—particularly pharmacy chains—are looking to diversify and bulk up in the face of the competitive threat from e-commerce giant Amazon.com Inc.

In December, CVS Health Corp. agreed to buy Humana rival Aetna Inc. in a $69 billion deal aimed at allowing the drugstore-chain to capture more of what consumers spend on health care. In March, health insurer Cigna Corp. agreed to buy Express Scripts Holding Co. , the biggest administrator of prescription-drug benefits in the U.S., for $54 billion.

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Walmart has a vast pharmacy business, with locations in most of its roughly 4,700 U.S. stores and in many of its Sam’s Club warehouse locations. Humana is a Medicare-focused insurer that could deepen Walmart’s relationship with a key demographic—seniors—at a time when the retailer is being threatened by Amazon on several fronts.

For Walmart, a deal would hand it a new role in health care, as well as a rich trove of data. In addition to its pharmacies, Walmart already has some primary-care clinics and recently said it would work with a major laboratory company to begin offering lab-testing services in some stores.


In announcing that partnership last June, a Walmart executive said the company was “not only focused on providing accessible, affordable health care, but also working to extend our offerings—truly making our stores a one-stop shop for our customers’ everyday health and wellness needs.”

The Bentonville, Ark., retailer is the country’s largest private employer, with about 1.5 million U.S. workers, and a deal with Humana could allow the retailer to save on its own insurance plan.

Humana, which had $53.8 billion in revenue last year, is the second-biggest provider of the private Medicare plans known as Medicare Advantage. Humana has about 17% of the Medicare Advantage market, according to a tally by analysts at Wells Fargo, with about 3.5 million participants. Medicare is viewed as a growth engine in the insurance industry, as the baby boomers age into the program.

The retail industry is undergoing another major shift—to e-commerce. How did we get here? Photo: Associated Press

Humana also owns its own pharmacy-benefit manager, which itself had revenue of about $21 billion last year, and Walmart and Humana already partner on Medicare drug plans. Humana has about 4.9 million people enrolled in its Medicare drug plans, known as Part D plans, and is the third-biggest provider of them, according to Wells Fargo.


Humana has been expanding into the business of providing health care, working closely with doctors. The insurer has said it aims to get deeper into managing the care of its members, as a means of curbing costs and meeting quality goals. Last year, the company said it would take a stake in a big home-health and hospice-care provider.

Meantime, Amazon has loomed ever larger in the health-care industry, especially after its January announcement that it would partner with Berkshire Hathaway Inc. and JPMorgan Chase & Co. on a venture to reduce their employees’ health-care costs. Amazon has been eyeing an entry into the pharmacy-services industry, and it recently expanded its discounted Prime program to beneficiaries of Medicaid, the government health-coverage program for lower-income people, a key demographic for Walmart.

A Walmart-Humana deal would cap a rapid-fire series of transactions that could transform the business of managing health care. Many of the biggest health insurers are pairing up with others outside their industry to create behemoths with a far larger role in the health-care sector after two attempted health-insurance mergers were blocked in early 2017 by courts on antitrust grounds: Aetna-Humana and Anthem Inc. -Cigna.

Write to Dana Mattioli at dana.mattioli@wsj.com, Sarah Nassauer at sarah.nassauer@wsj.com and Anna Wilde Mathews at anna.mathews@wsj.com