Express Scripts to Buy Medco for $29B: WSJ
The $71.36 offer in cash and stock is 28 percent more than Medco’s closing price of $55.78 yesterday, the Journal said, citing people familiar with the deal. The transaction may be announced as soon as today, according to the newspaper.
The takeover would be the largest in pharmacy services in at least a decade, surpassing the $21.7 billion deal that formed CVS Caremark Corp. in 2007. Buying larger Medco, led by Chairman and Chief Executive Officer David Snow, would give Express Scripts the scale to dominate the market for contracts to manage drug benefits for corporate and government clients.
Brian Henry, a spokesman for St. Louis-based Express Scripts, declined to comment on the report. Ann Smith, a spokeswoman for Medco, didn’t immediately return a call seeking comment.
The companies negotiate drug prices for corporate and government insurance plans and manage employee pharmacy claims. Franklin Lakes, New Jersey-based Medco is the largest by revenue, followed by Woonsocket, Rhode Island-based CVS Caremark and Express Scripts, run by Chairman and CEO George Paz.
Medco has lost $3.5 billion in contracts since March. The company’s $11 billion contract with UnitedHealth Group Inc. (UNH), representing about 17 percent of its business, expires after 2012.
Express Scripts rose 69 cents to $52.54 yesterday on the Nasdaq Stock Market. Medco advanced $1.25 to $55.78 on the New York Stock Exchange.
Medco shares have declined 13 percent since May 26, the day before the company announced loss of a $3 billion contract covering 9.8 million mail-order prescriptions. Medco in March lost the renewal of a $500 million contract with the California Public Employees Retirement System.
Competition intensified among pharmacy-benefits managers after Express Scripts moved forward with integrating Indianapolis-based WellPoint Inc. (WLP)’s pharmacy-benefits unit with 25 million members. CVS, in the past year, grabbed a contract with Capital Blue Cross of Pennsylvania from Express Scripts and the federal workers plan from Medco.
The number of potential targets dwindled after Hartford, Connecticut-based Aetna Inc. gave a 12-year, $9.5 billion contract to CVS last July and UnitedHealth began investing in its pharmacy benefits unit.
The deal for Medco would also be the second-largest this year, after AT&T Inc.’s $39 billion planned acquisition of T- Mobile USA Inc. The pharmacy-benefits manager is scheduled to report results today.
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