Orlando, FL 4/18/12 (StreetBeat) -- SXC Health Solutions (Nasdaq: SXCI) agreed on Wednesday to buy Catalyst Health Solutions (Nasdaq: CHSI) for about $4.4 billion in cash and stock, uniting two companies in the drug benefits management sector.Under the terms of the deal, SXC will pay $28 in cash and 0.6606 of a share, valuing Catalyst at about $81.02 a share. That is a 28 percent premium to Catalyst’s closing price on Tuesday.
Both companies are benefits managers, which contract with both drug companies and pharmacies to dispense medicine and process claims. Catalyst in particular is one of the faster growing managers, focused on smaller or more local clients like unions and state governments.
The combined company will have about $13 billion in revenue and cover about 25 million members, responsible for more than 200 million prescriptions written each year. It will be based in SXC’s hometown of Lisle, Ill.
SXC and Catalyst are combining at a time of consolidation and upheaval for drug benefits managers. Two of the biggest companies in the industry, Express Scripts and Medco Health Solutions, are on track to merge in a $29 billion deal, while insurers like UnitedHealth and other companies are setting up their own benefits operations.
“This is an extremely compelling combination that brings together SXC’s industry-leading tools and technology with Catalyst’s full-service P.B.M., best-in-class service and growing client base to create a company that is even better positioned to compete in the marketplace,” Mark Thierer, SXC’s chairman and chief executive, said in a statement.
Mr. Thierer will retain both roles in the merged entity, while two Catalyst directors will join its board.
SXC said that it expected the deal to begin adding to its earnings next year, generating about $125 million in cost savings over the first 18 months to two year after the deal closes.
The cash portion of the merger will be financed with about $1.7 billion in debt.
SXC was advised by JPMorgan Chase, Barclays and the law firm Sidley Austin. Catalyst was advised by Goldman Sachs, Citigroup and the law firm Milbank, Tweed, Hadley & McCloy.
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