SXC Health Solutions Corp. said Wednesday that it plans to buy competitor Catalyst Health Solutions Inc. for about $4.4 billion in cash and stock in an acquisition that catapults the company into the top tier of pharmacy benefits management and marks the continued consolidation of the industry.
The combined company's headquarters will remain in Lisle. It will become the nation's second largest pharmacy benefits manager, or PBM, in terms of prescription volume, said SXC Chairman and Chief Executive Mark Thierer, who will retain those roles. The combined company will have an expected $13 billion in revenue.
"The transaction will expand our reach to larger clients," Thierer said in a morning conference call.
SXC and Rockville, Md.-based Catalyst have little overlap among clients, he said.
SXC, which administers prescription drug benefits for insurers, employers and other groups, is among the fastest-growing companies in the Chicago area and the country. In September it landed the No. 1 spot on Fortune's 2011 list of fastest-growing companies, which ranks firms based on revenue and earnings-per-share growth and three-year annualized total return.
Under terms of the deal, which is expected to close in the second half of 2012, Catalyst shareholders will receive $28 in cash and 0.6606 SXC shares for each Catalyst share held. SXC offered Catalyst $81.02 per share, a premium of about 28 percent to Catalyst's Tuesday close. SXC plans to finance the transaction in part with $1.7 billion in debt.
"This is an extremely compelling combination that brings together SXC's industry-leading tools and technology with Catalyst's full-service PBM, best-in-class service and growing client base to create a company that is even better positioned to compete in the marketplace," Thierer said, in a release.
The announcement comes just weeks after pharmacy benefits manager giant Express Scripts Inc. completed its $29.1 billion merger with Medco Health Solutions Inc., creating the largest PBM in the nation, filling a combined 1.4 billion prescriptions a year for employers and insurers.
Previous to the SXC and Catalyst deal, CVS Caremark Corp., was the No. 2 PBM.
For SXC, the acquisition underscores the company's exponential growth since 2006, when Thierer moved from SXC's board of directors to the company's executive team.
At the time, the company was a behind-the-scenes player in the industry, peddling software and processing services to other PBMs. Its annual revenue in 2006 was $54 million, and its stock was trading for a hair above $5 a share.
After a series of acquisitions and a handful of major contracts, the company's 2011 sales rose to $5 billion. Prior to the Catalyst deal, SXC's largest acquisition was Healthtrans LLC, which it bought for $250 million in January.
Its stock surged more than 7 percent to $86.27 in morning trading Wednesday.
In a February interview with the Tribune, Thierer hinted at further acquisitions, saying he expected the company to be among the top three in the industry within the next three years.
"You're starting to see us walking up the ladder and into the backyard of the big three and taking on much larger clients than we have in the past," he said at the time.
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