Tuesday, SXC Health Solutions Corp. (SXCI, SXC.TO) said it agreed to acquire National Medical Health Card Systems, Inc. (NMHC) for approximately $143 million in cash and stock. In the pre-market, NMHC stock is up over 9%.
The deal is expected to create a leader in Pharmacy Spend Management. NMHC's base of 300 customers and 2.3 million lives under management, coupled with its established mail-order and specialty pharmacy operations, expands the capabilities of SXC's full-service Pharmacy Benefit Management offering and is complementary to SXC's traditional software license and ASP business.
Under the deal, the purchase price will be funded with a combination of 70% cash and 30% SXC stock, resulting in a consideration of $11.00 per share. This represents a 13% premium to the 20-day average closing price of NMHC common stock.
A subsidiary of SXC will commence an exchange offer for shares of NMHC common stock. Tendering stockholders will receive $7.70 in cash and 0.217 shares of SXC common stock. The acquisition is expected to close in the second quarter of 2008, and is subject to various closing conditions
SXC expects to begin to realize synergies in the first year, while continuing to invest in the migration of NMHC's claims processing systems to the SXC platform. Excluding special items and including anticipated synergies, SXC expects the acquisition to be dilutive to SXC's earnings in fiscal 2008 and accretive thereafter.
SXC said expected synergy opportunities include approximately $6 - $8 million of cost savings and revenue opportunities in the first 12 months post-closing. This is expected to increase to $12 - $14 million or more in year two. SXC believes revenue synergy opportunities exist in network and rebate optimization, as well as in cross-sell opportunities with clinical programs, specialty pharmacy and mail service pharmacy.
The combined company will be headquartered in Lisle, Illinois, under the leadership of SXC's chief executive Gordon Glenn as Chairman and CEO. Mark Thierer of SXC will remain President and COO and Jeff Park, Senior Vice President, CFO and Secretary of SXC will serve in the same capacity.
SXC shares closed Monday's trading at $15.95. Shares of NMHC closed Monday's regular trading session at $9.85. In the pre-market, NMHC stock is up 95 cents or 9.64% at $10.80.
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