Medco Health Solutions Inc

Posted by Zotta Rendevouz

Express Scripts Inc. agreed to acquire Medco Health Solutions Inc., $ 29.1 billion deal with at least ten of the largest among U.S. companies manage prescription drug benefits.

Offer-$ 71.36 a share in cash and stock is 28 percent more than yesterday's closing price of $ 55.78 Medco. Investors in Franklin Lakes, New Jersey company will receive $ 28.80 cash and 0.81 of Express Scripts one share for every share held at the end of Medco, a company in a statement.

Buy Medco provides St. Louis-based Express Scripts scale to become dominant among the companies that manage drug benefits for business and government clients. Medco also announced today a contract lost $ 11 billion with the insurer UnitedHealth Group Inc., which represented 17 percent of its business. The loss drops Medco No. 3 in the industry, leakage, Express Scripts and CVS Corp Care Mark

"Wow, I've seen the next," said Art Henderson, an analyst at Jefferies & Co. in Nashville, Tennessee, is an e-mail today. "It 'an incredible synergy here, but I'm sure this will go through a long" review of the regulatory authorities of the United States.

The deal came together quickly, with interviews from a few weeks ago, according to three people familiar with the deal who declined to be identified because the talks are private. Previous discussions about a possible merger helped to hasten the operation, the people said.

Medco executives and consultants contact Express Scripts to let them know they were open for sale due to concerns about Medco contracts had lost last year, CVS Caremark Corp. and feared it could sell its Pharmacy Express Scripts, said the people .

Previous FTC Probe

The acquisition of Medco, once completed, is expected to exceed $ 21700000000 agreement that formed CVS Care Mark 2007 as the largest in the industry for a decade. CVS won the case after the FTC began an investigation into possible anti-competitive aspects of a rival bid from Express Scripts.

The agreement announced today, Medco will receive a "very, very closely," The regulatory authorities before being closed, said Bob Leibenluft, who led the FTC's health department, 1996-1998 and is now a partner at Hogan Lovells LLP, a law firm in Washington.

Medco rose $ 7.96, or 14 percent, to $ 63.74 at 12:43 New York Stock Exchange composite trading, after gaining as high as $ 66.38. Express script rose $ 2.80, or 5.3 percent, $ 55.34. CVS was 3.3 per cent of $ 38.17.

The value of the project will depend on the price of Express Scripts in cash at closing, the company said.

CEO George Paz of Express Scripts said in a conference call with analysts that the combined companies would have "if we thought it would be approved" by the FTC. "We believe that we will work our way successfully through the regulatory approval process," he said.

Pitch regulators, which is mostly national accounts Medco and Express is a local and smaller businesses, and that United HealthCare will be a strong number 3, said a person familiar.

Termination fee

Agreement between the Company, no termination fee payable if the transaction does not receive regulatory approval in the United States. The FTC investigates whether pharmacy benefit managers owned by insurance companies, as well as regional and niche businesses to sufficient competition to keep prices low, a former FTC official said Leibenluft.

"It 'hard to get this past the FTC," Sanford Bernstein said Wolk. "But the growth of United HealthCare" pharmacy department of the insurer, "we will be back there are three dominant players."

Pharmacy benefit managers to negotiate drug prices for the employer and the employees' state insurance and claims management. The company, which combines Medco and Express Scripts would control about 30 percent market share by 2013, says Helene Wolk, an analyst at Sanford Bernstein in New York.

CVS, United HealthCare

CVS care market, on the basis of Woonsocket, Rhode Island, control of the "low 20s" market, while United HealthCare of the group will increase the "low teens", he said.

Express Scripts and Medco have been historically different cultures, said Wolk. Medco is a strategic approach and long term, we will take a while Express Scripts is usually short-term economic vision guided, he said.

Medco led by President and CEO David Snow, who lost $ 3.5 billion contract in March. The share fell 13 percent from 26 May the day before the company reported a loss of $ 3 billion contract covers 9.8 million mail-order prescriptions. In March, the company did not renew $ 500 million with the public employees retirement system, California.

David Larsen, an analyst at Leerink Swann & Co. in Boston, said in a note today that Express Scripts will pay 9.1 times 2012 estimated earnings Medco before interest, taxes, depreciation and amortization, excluding contract UnitedHealth and potential savings .

Cost Savings

About $ 1 billion in cost savings have been identified so far and should be "a little 'to increase the first year after the closing deal, and moderately to start when fully integrated," said Larsen, NB. CVS Corp., has paid 12.2 times EBITDA by Mark Rx Inc. in 2007.

"People wildest speculations in their thinking that, perhaps in 2013, after Medco UnitedHealth lost, it could merge with Express Scripts, but honestly, no one put much stock in it," Bernstein said Wolk.

Credit Suisse AG and Citigroup Inc. provided financial advice to Express Scripts, a Skadden, A, Slate, Meagher & Flom, LLP, has given a lawyer. Medco to co-lead financial advisors are JP Morgan Chase & Co. and Lazard, with Sullivan & Cromwell LLP as legal advisor and Dechert LLP, legal counsel.

Second largest contract

Medco's case is the second largest this year in the United States, after AT & T Inc. $ 39 billion proposed acquisition of T-Mobile USA Inc. The Wall Street Journal reported the deal today.

Express Scripts and Medco also reported the second quarter. Express Scripts earned 71 cents per share, excluding certain items, matching the average estimate of analysts compiled by Bloomberg. The company reaffirmed its forecast for this year of $ 3.15 to $ 3.25 per share. Analysts expect $ 3.19, the average of 25 estimates compiled by Bloomberg.

Medco posted profits in the second quarter excluding certain costs of 96 cents per share, beating the average estimate of analysts 94 cents.