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PharMerica Drops on Report Its Takeover May Be Blocked by U.S. Regulators

PharMerica Corp. (PMC) fell the most in three months after the New York Post reported U.S. regulators may block Omnicare Inc. (OCR)’s $440.8 million takeover of the drug- supply company. Omnicare also declined.

PharMerica, based in Louisville, Kentucky, decreased 8.2 percent to $13.74 at the close in New York, its biggest drop since Oct. 4. A decision on Omnicare’s unsolicited offer of $15 a share by the Federal Trade Commission may come by the end of next week, the newspaper said, citing an unidentified source familiar with the situation.

Omnicare, in a filing, earlier this week said it agreed not to complete the PharMerica offer before Jan. 26 unless the FTC notifies the company that the regulatory review is finished. The deal may enable Covington, Kentucky-based Omnicare to control as much as 60 percent of the market to distribute drugs to nursing homes, hospitals and hospices, said Jeff Jonas, an analyst with Gabelli & Co. in Rye, New York.

“The problem is there aren’t really any other big competitors out there,” Jonas said in a telephone interview. “I’m inclined to believe that this would be blocked. There’s nobody else of any scale out there.”

Omnicare fell 7 percent to $32.90. The shares have gained 28 percent in the past 12 months. The deal has a value of $716 million including net debt, Omnicare said when announcing the takeover bid in August.

Antitrust Issue

“People are concerned about the antitrust issue,” said Jason Gurda, an analyst with Leerink Swann & Co. in Boston. The New York Post journalist has a history covering deals, so investors can’t ignore the story, Gurda said in a telephone interview.

Omnicare declined to comment, said Jamie Moser, an outside spokeswoman. PharMerica doesn’t take part in the discussions between the FTC and Omnicare and doesn’t have any details, said Meghan Stafford, a PharMerica spokeswoman.

“Omni was, has been and continues to be unwilling to discuss any FTC matters with us,” Gregory Weishar, the chief executive officer of PharMerica, said today during a presentation at the J.P. Morgan Healthcare conference in San Francisco.

The deal offers an opportunity to achieve efficiencies through automation and scale, Omnicare CEO John Figueroa said when the deal was announced in August. Omnicare is trying to save money amid U.S. cuts to health-care spending, he said.

The deal would save more money than is reflected in the bid price, which is why PharMerica rejects it, Weishar said.

Undervalued

“It undervalues PharMerica,” he said. “Reasonable success in executing our growth strategy will lead to greater shareholder value than the $15.”

Increased antitrust scrutiny from U.S. regulators under President Barack Obama already scuttled two of 2011’s biggest proposed acquisitions.

Dallas-based AT&T Inc. (T)’s $39 billion bid for T-Mobile USA, which would have made it the largest U.S. wireless carrier, fell apart last month following a lawsuit from the Justice Department and possible opposition from the Federal Communications Commission.

Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. dropped their $11.3 billion bid for NYSE Euronext in May after the Justice Department, citing monopoly concerns, indicated it would block the proposal.

“Obama promised that he’d be tougher on this and they’re raising the bar,” Jonas said.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net;

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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