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CVS HEALTH CORPORATION

(CVS)
  Report
Real-time Estimate Quote. Real-time Estimate Cboe BZX - 09/16 03:54:31 pm
85.55 USD   +0.01%
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CVS to expand pharmacy business with $10.1 billion Omnicare buy

05/21/2015 | 11:20am EDT
File photo of a CVS pharmacy is seen in New York City

(Reuters) - Drugstore operator CVS Health Corp (>> CVS Health Corp) said Thursday it will spend $10.1 billion to buy Omnicare Inc (>> Omnicare, Inc.), a company that supplies prescription medicines to nursing, assisted living and other healthcare facilities.

(Reuters) - Drugstore operator CVS Health Corp (>> CVS Health Corp) said Thursday it will spend $10.1 billion to buy Omnicare Inc (>> Omnicare, Inc.), a company that supplies prescription medicines to nursing, assisted living and other healthcare facilities.

The move gives CVS, the second-largest U.S. drugstore operator, access to the older, sicker U.S. population and builds on its specialty pharmacy, which provides drugs to people with expensive chronic conditions such as rheumatoid arthritis.

CVS said it expects the deal to add about 20 cents to adjusted earnings per share in 2016. The deal also includes debt of about $2.3 billion, the companies said.

The pharmaceutical sector has been consolidating as companies look to beef up and bargain for lower prices from both drug manufacturers and the three largest U.S. drug distributors.

"There's a lot of purchasing scale. There's a lot more volume. They could renegotiate their supply contracts given the volume," said FBR analyst Steven Halper.

In addition to its drugstore chain and mail-order sales, CVS is the second-largest pharmacy benefit manager in the United States, securing pricing for big employers and government plans.

CVS offered $98 per Omnicare share, representing a premium of 4 percent to the closing price Wednesday of Omnicare, the top U.S. provider of pharmacy services to the elderly.

The offer is at a nearly 21 percent premium to Omnicare's April 21 close, a day before Bloomberg reported that the company was exploring a sale.

Shares of Omnicare, rose 1.5 percent to $96 while CVS was up 2.8 percent at $104.08.

FOLLOWS OTHER DEALS

Bloomberg first reported Wednesday that CVS was nearing a deal to buy Omnicare.

Speculation has mounted of more pharmacy-industry consolidation as others have tied up, and the field of companies involved in drug distribution, sales or management has shrunk.

Health insurer UnitedHealth Group Inc (>> UnitedHealth Group Inc.) agreed to buy Catamaran Corp (>> Catamaran Corp (USA)) (>> Centenario Copper) for about $12.8 billion in March. Rite Aid Corp (>> Rite Aid Corporation) bought pharmacy benefit manager EnvisionRx for about $2 billion in February. Last year, pharmacy Walgreen tied up with European pharmacy and drug distribution company Boots Alliance.

CVS said it secured $13 billion in financing from Barclays for the deal, which is expected to close near the end of 2015.

Barclays and Evercore are CVS's financial advisers, while Bank of America Merrill Lynch and Centerview Partners advised Omnicare. CVS's legal adviser is Sullivan & Cromwell LLP, while White & Case LLP served as Omnicare's legal counsel.

(Reporting by Caroline Humer in New York and Sruthi Ramakrishnan and Vidya L Nathan in Bengaluru; Editing by Sriraj Kalluvila and Bernadette Baum)


© Reuters 2015
Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA CORPORATION 1.23% 40.644 Delayed Quote.32.43%
CVS HEALTH CORPORATION 0.11% 85.625 Delayed Quote.25.24%
EVERCORE INC. -0.43% 139.375 Delayed Quote.27.63%
UNITEDHEALTH GROUP 0.01% 417.63 Delayed Quote.17.64%
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Financials (USD)
Sales 2021 284 B - -
Net income 2021 8 454 M - -
Net Debt 2021 48 933 M - -
P/E ratio 2021 13,4x
Yield 2021 2,33%
Capitalization 113 B 113 B -
EV / Sales 2021 0,57x
EV / Sales 2022 0,53x
Nbr of Employees 256 500
Free-Float 75,5%
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CVS Health Corporation Technical Analysis Chart | CVS | US1266501006 | MarketScreener
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Number of Analysts 27
Last Close Price 85,54 $
Average target price 96,89 $
Spread / Average Target 13,3%
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Managers and Directors
Karen S. Lynch President, Chief Executive Officer & Director
Shawn M. Guertin Chief Financial Officer & Executive Vice President
David Wyatt Dorman Chairman
Troyen A. Brennan Chief Medical Officer & Executive Vice President
Jonathan C. Roberts Chief Operating Officer & Executive Vice President