Pharmaceutical healthcare company BioScrip, Inc. (BIOS) Monday said it has signed deal to acquire privately-held homecare services provider Critical Homecare Solutions Inc., for an aggregate of $343.2 million in a cash and stock deal. The deal is anticipated to be modestly accretive to earnings per share on a cash basis and slightly dilutive in 2010. BioScrip expects cash and earnings per share accretion in 2011 and beyond.
As per the agreement terms, the consideration will include $242 million in cash, including about $132 million to repay Critical Homecare debt and issuance of $101.2 million of common stock, or nearly 12.94 million shares based on BioScrip's closing stock price of $7.82 on January 22. In addition to this, BioScrip will also issue 3.40 million warrants with a $10 exercise price and five-year term to the shareholders of Critical Homecare.
BioScrip stated that investment banking group Jefferies Finance LLC has provided a $375 million financing commitment, including a $50 million revolving credit facility, which is expected to be substantially unfunded at the close of the transaction. The deal is anticipated to be financed through a combination of bank financing and issuance of senior notes. The deal is expected to close by March 31, 2010, subject to regulatory approvals and other closing conditions, including the expiration of waiting period under Hart-Scott-Rodino.
US private equity firm Kohlberg & Company, L.L.C., and controlling shareholder of Critical Homecare, will hold around 24% of BioScrip's common stock on a fully diluted basis and will be entitled to nominate two directors to join BioScrip's board with the closing of the transaction.
Elmsford, New York-based BioScrip said the acquisition will allow it to expand its national presence, focus on traditional higher margin therapies, resulting in overall increased margins, access to 450 additional payor relationships, and expects annual cost savings of $5 million to $7 million, including enhanced volume purchase discounts.
Assuming a closing date of March 31, BioScrip said its financial results for 2010 would include nine months of Conshohocken, Pennsylvania-based Critical Homecare's operations.
Looking ahead to 2010, BioScrip estimates the combined company to generate revenues of approximately $1.67 billion to $1.73 billion, gross profit of $267 million to $277 million, or nearly 16% of sales, and adjusted earnings before interest, taxes, depreciation, amortization, and option expense, or EBITDAO, of $67 million to $71 million.
BioScrip added that the increased volume, access to high margin therapies and operating synergies available to the combined companies are anticipated to provide significant increases in revenues, an expected 600 basis point improvement in gross margins and an estimated 200 basis point improvements in EBITDAO.
Commenting on the acquisition, BioScrip Chairman and Chief Executive Officer Richard Friedman said, "The CHS acquisition will add 35 specialty infusion pharmacies, including 16 Ambulatory Treatment Centers (ATC) across 22 states, and 33 nursing locations to BioScrip's existing platform."
For the 12-month period ending September 30, 2009, Critical Homecare generated revenues of nearly $252 million. On a proforma basis, the combined company generated around $1.6 billion in revenues for the period.
In Friday's regular trading session, BIOS closed trading at $7.82 per share on the Nasdaq. In the past 52-week period, the shares have been trading in a range of $1.35 to $9.05.
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