SXC Health Solutions Corp. plans to buy fellow pharmacy benefits manger Catalyst Health Solutions Inc. in a deal worth more than $4 billion, less than a month after competitor Express Scripts Inc. closed a $29.1 billion acquisition.
SXC Health said Wednesday it will pay $28 in cash and a portion of its stock valued at $53.02 per share for each share of Catalyst. That equals a purchase price of $81.02 per share, a premium of about 28 percent over Catalyst's Tuesday closing price of $63.54.
The companies valued the deal at $4.4 billion, including debt. Catalyst had about 50.2 million shares outstanding as of Feb. 1, which would equate to a total value for the deal of about $4.1 billion.
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Catalyst shares have already appreciated 22 percent since closing 2011 at $52 per share, and they shot up 32 percent, or $20.60, to $84.14 Wednesday in afternoon trading. SXC's stock climbed 9.4 percent, or $7.57, to $87.84.
Shareholders from both companies still need to approve the deal. If they do, SXC shareholders would own about 65 percent of the combined company, and Catalyst shareholders would own about 35 percent.
The combined company will be headquartered in Lisle, Ill., which is where SXC is based, and will have an annual prescription volume of more than 200 million.
In contrast, the combination of Express Scripts and Medco Health Solutions Inc., which closed on April 2, should fill about 1.5 billion prescriptions a year, based on 2011 figures, according to an Express Scripts spokesman. Express Scripts' purchase of Medco makes it the largest PBM in the country by far.
Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, government agencies and other clients, using their large purchasing power to negotiate lower drug prices. They make money by reducing costs for health plan sponsors and members.
SXC also provides health care information technology services to health care benefits management companies.
The deal will give SXC better purchasing power and a bigger presence in key government business areas, BMO Capital analyst Dave Shove said in a research note.
The companies expect the deal, which still needs antitrust approval from U.S. regulators, to close in the second half of this year. SXC has secured financing from J.P. Morgan Chase Bank, N.A. for the cash portion of the deal.
SXC expects the deal to start helping its adjusted earnings in 2013, but it also expects annual interest expense of around $70 million due to $1.7 billion in debt financing needed for the deal.
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