SXC Health Solutions Corp. and Catalyst Health Solutions, Inc. announced their boards of directors unanimously approved a definitive merger agreement between both companies, combining cash and stock valued at approximately $4.4 billion, according to a company press release.
Catalyst shareholders will receive $28 in cash and 0.6606 shares of SXC stock for each Catalyst share, “which implies a purchase price of $81.02 per Catalyst share and a premium of approximately 28 percent based on the closing stock prices of SXC and Catalyst on April 17, 2012,” according to the source.
The transaction unites SXC's pharmacy benefit management (PBM) tools and technology with Catalyst's local and collaborative client-centric PBM business model to offer plan sponsors, members and physicians customized solutions to reduce pharmacy and healthcare costs and improve patient outcomes.
PBM companies merge retail pharmacy claims processing, formulary management and home delivery pharmacy services to create an integrated product offering for payers. Analysts expect this market to grow substantially with the aging of the population.
Once the transaction is complete, the new combined company will have $13 billion in revenue, and will be headquartered in Lisle, Illinois, while maintaining a presence in Rockville, Maryland. SXC will also maintain and expand Catalyst's "Centers of Excellence" strategy.
The transaction is expected to substantially increase SXC's non-GAAP earnings in 2013, excluding “transaction-related amortization expected to be approximately $200 million in the first twelve months after closing,” the source reports.
The combined company expects to save roughly $125 million over the first 18 to 24 months after closing through improved scale and operating leverage.
The new company expects to incur approximately $40-45 million of transition expenses to achieve these reduced costs. SXC “expects annual interest expense to be approximately $70 million due to financing the transaction with $1.7 billion in debt.”
The goal of the merger is to have substantial financial flexibility to continue growth initiatives while paying down debt.
"Catalyst has long been a distinguished leader in our industry, and the combined company will continue to provide the same high quality, localized approach and service to customers for which Catalyst is known," said David T. Blair, chairman and CEO of Catalyst. "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."
Edited by
Braden Becker
