Investment banks working with Express Scripts Inc. (ESRX) and Medco Health Solutions Inc. (MHS) will glean an estimated $120 million in combined fees for advising on the second-biggest U.S. acquisition of 2011.
Express Scripts advisers Credit Suisse Group AG (CSGN) and Citigroup Inc. (C) may earn as much as $55 million if the deal goes through, while Medco’s main bankers JPMorgan Chase & Co. (JPM) and Lazard Ltd. (LAZ) may get $65 million, according to estimates by Lam Nguyen, vice president at New York-based research firm Freeman & Co. This doesn’t include any fees that might be earned by arranging financing for the deal, Nguyen said.
Express Scripts said today it agreed to buy Medco Health for $29.1 billion to become the largest pharmacy-benefits manager in the U.S. Buying Medco gives St. Louis-based Express Scripts the scale to become dominant among companies that manage prescription drug benefits for corporate and government clients.
Medco, based in Franklin Lakes, New Jersey, also said today it lost an $11 billion contract with insurer UnitedHealth Group Inc. that accounted for 17 percent of its business. The loss drops Medco to No. 3 in the industry, trailing Express Scripts and CVS Caremark Corp.
JPMorgan is leading banks on mergers & acquisitions advice this year, with $329.9 billion in deals, according to data compiled by Bloomberg. Including the Medco takeover, the New York-based bank has had a role in the three biggest deals of 2011 so far, the data show. It was an adviser to AT&T Inc. on its proposed $39 billion purchase of T-Mobile USA Inc. and worked with Duke Energy Corp. on its acquisition of Progress Energy Inc.
Surpassing CVS Deal
Goldman Sachs Group Inc. and Morgan Stanley, the second-and third-ranked advisers, respectively, weren’t among the banks listed on the Medco transaction. Morgan Stanley was the top deal adviser in 2010, followed by Goldman and JPMorgan.
Express Scripts received legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP. Medco’s legal adviser was Sullivan & Cromwell LLP and regulatory counsel was Dechert LLP.
The Medco takeover, once completed, will surpass the $21.7 billion agreement that formed CVS Caremark in 2007 as the largest in the industry in a decade. CVS won the deal after the Federal Trade Commission began an inquiry into possible anti- competitive aspects of a rival bid by Express Scripts.
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