SXC Health Buys Catalyst for $4.4B as Industry Consolidates
NEW YORK (TheStreet) -- SXC Health Solutions (SXCI) is buying Catalyst Health Solutions(CHSI) for roughly $4.4 billion in a cash and stock deal that will continue consolidation in the pharmacy drug benefits manager space.
The merger, which values Catalyst Health Solutions at $81.02 a share, or a 28% premium to Tuesday's closing price, comes on the heels of a Federal Trade Commission approval of a blockbuster $29.1 billion acquisition of Medco Health Solutions(MHS) by Express Scripts (ESRX) earlier this month that may create the largest player in the space.
After that approval earlier in April, Express Scripts shares surged on expectations that the tie-up would create higher-than-expected cost savings. Traders initially saw the offer as a positive for SXC Health Solutions, pushing its shares nearly 9% higher. Meanwhile, Catalyst Health Solutions shares rose over 32% in premarket trading to $84, reflecting the higher stock value of the offer.
In the cash and stock offer, SXC will pay Catalyst $28 a share in cash and will make the remaining purchase price in a 0.6606 a share stock conversion. While the deal initially values SXC at $81.02 a share based on Tuesday's close, the near 9% jump in the company's stock to $87.48 in premarket trading makes the offer richer.
When the FTC approved the Express Scripts and Medco Health Solutions merger, the regulator pointed to Catalyst Health Solutions as a fast rising competitor in pharmacy benefits market, where companies contract work between drug companies and pharmacies to provide prescription drug plans to corporate, government agency and unionized worker health plans. SXC was also considered a competitor in what the FTC characterized as an increasingly competitive space.
In its approval, FTC also highlighted smaller players industry players like Catalyst and SXC Health Solutions as competitors with "recent success winning significant employer business, including large employer accounts."