SXC Health Solutions Corp. (SXCI: Quote, SXC.TO) has decided to bulk up its pharmacy benefit management business. The company, which also makes software and systems that process drug claims, said Wednesday it will acquire like-sized pharmacy benefit manager Catalyst Health Solutions, Inc. (CHSI: Quote) by paying $81.02 per share in cash and stock to create a $13 billion firm.
The move comes just weeks after federal regulators approved the industry's biggest merger - the $29 billion combination of Express Scripts and Medco Health Solutions.
SXC was seen as an expensive takeover target, particularly after the nation's big two drug benefits managers agreed to merge. The combination with Catalyst makes it even more attractive.
The cash and stock deal is valued at about $4.4 billion. Upon closing of the deal, SXC shareholders will own 65 percent of the combined company and Catalyst shareholders the rest.
Mark Thierer, chairman and chief executive officer of SXC said, "This is an extremely compelling combination that brings together SXC's industry-leading tools and technology with Catalyst's full-service PBM, best-in-class service and growing client base to create a company that is even better positioned to compete in the marketplace."
As per the terms of the agreement, Catalyst shareholders will receive $28 in cash and 0.6606 shares of SXC stock for each Catalyst share. This implies a purchase price of $81.02 per Catalyst share and a premium of nearly 28 percent, based on the closing stock prices of SXC and Catalyst on April 17, 2012.
The Boards of both the companies have unanimously approved the agreement. The transaction, which is expected to close in the second half of 2012, is anticipated to be highly accretive to SXC's non-GAAP earnings in 2013, excluding transaction-related expenses.
The combined company expects to achieve about $125 million of annual cost synergies over the first 18 to 24 months after closing.
The married company will be headquartered in Lisle, Illinois, with $13 billion in revenue. SXC will use $1.7 billion in debt to finance the deal. It has secured fully committed financing from J.P. Morgan Chase Bank, N.A. for the cash portion of the transaction.
David Blair, chairman and chief executive officer of Catalyst stated, "This transaction will create significant benefits for our clients through a broader range of product offerings, more effective cost management, and increased investment in innovative programs and technologies."
Upon closing, Thierer will serve as chairman and CEO of the combined firm, with Blair providing support to ensure a seamless integration.
In addition, both the companies reaffirmed their full-year 2012 guidance, excluding the costs related to the proposed transaction. The related cost for SXC is expected to be about $25 million.
SXC shares closed Tuesday's regular trading at $80.26 on the Nasdaq and C$79.63 on the Toronto Stock Exchange. CHSI shares closed at $63.54.
by RTT Staff Writer
For comments and feedback: firstname.lastname@example.org