CVS Health Corporation (CVS) agreed on Thursday to acquire pharmacy services provider Omnicare Inc. (OCR) for $10.4 billion to expand its footprint in serving the growing senior patient population. The deal, which is subject to regulatory approval, is scheduled to close near the end of the year.
CVS offers $98 a share to acquire Omnicare
CVS Health, the drugstore chain which changed its name from CVS Caremark in September of last year, is the biggest U.S. prescription drug retailer. Omnicare, one of the nation’s largest long-term care pharmacy providers, has been exploring a sale since April. Woonsocket, Rhode Island-based CVS’ offer of $98 a share in cash represents a 3.6% premium to Omnicare’s closing price on Wednesday. The deal is valued at $12.7 billion when $2.3 billion in debt in included.
Reacting favorably to the announcement, shares of CVS gained 1.9% in premarket trading, while Omnicare’s shares gained 1%. Omnicare’s shares had risen 9.5% since April when news spread that the company was fielding takeover interest.
The latest deal would give CVS 160 Omnicare locations in 47 states across the U.S. where the drugstore giant can expand in the growing business of dispensing and managing prescriptions for a booming number of specialized drugs. The deal will also enhance CVS’ ability to dispense prescriptions in assisted-living and long-term care facilities. Besides revenue synergies, CVS anticipates that the deal will add 20 cents to its adjusted per-share earnings next year and become increasingly accretive after that.
CVS has secured $13 billion in fully committed unsecured bridge financing from Barclays PLC (NYSE:BCS) (LON:BARC) and anticipates putting in place permanent financing in the form of senior notes and term loans before the closing of the deal.
In the U.S., the government has expanded health insurance under the Affordable Care Act by expanding Medicaid coverage to more poor Americans and offering subsidized coverage to eligible uninsured people via private insurance companies. Under the ACA, payments are more based on quality and costs, moving health care payments away from the traditional fee-for-service approach that leads to over-treatment and toward value-based medicine. Pharmacies are more involved in coordinating care and have to keep a close eye on costs.
