(The Street)CVS Health Corp (NYSE:CVS) said that it will acquire pharmacy services provider Omnicare Inc. (OCR) for $12.7 billion.
Under the terms of the deal, CVS will purchase the Cincinnati-based long-term-care facilities pharmacy services provider for $98 a share in cash. The $12.7 billion enterprise value of the deal includes about $2.3 billion in debt.
The purchase will help CVS expand its ability to provide prescriptions to assisted-living and LTC facilities, serving the rapidly aging American senior patient population.
The transaction is one in a series of deals in the pharmacy benefits management sector.
In March, UnitedHealth Group (UNH) said that it would acquire pharmacy benefits manager Catamaran (CTRX) to combine with its OptumRx group for $12.8 billion. Earlier this year, private-equity firm TPG Capital sold its pharmacy benefit management business Envision Pharmaceutical Holdings to strategic buyer Rite Aid (RAD) for $2 billion.
Woonsocket, R.I.-based CVS said in a statement Thursday that it expects the transaction to be 20 cents accretive to adjusted earnings per share in 2016.
The company secured $13 billion in unsecured bridge financing from Barclays and expects to put in place financing in the form of senior notes or term loans before the transaction closes. CVS expects the deal to close by the end of this year.
The graying of America is a trend that has been affecting health care across the board, and pharmacy benefit management is no different. From home health care to helping seniors age in place, to technological advances to help organize patients easier in the system, the aging population has made the health care sector a hot spot for deals as Americans age into assisted-living facilities and independent-living communities.
“The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel,” CVS President and Chief Executive Larry Merlo, said in a statement.
“It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of seniors and chronic-care patients as they transition across the care continuum,” he said. “We have been impressed by the Omnicare team and what they have created for the patients they serve.”
CVS Health Equity Analysis
CVS Health Corp (NYSE:CVS) opened trading today as $104.58 and is trading in the range of 101.24-104.74 today. CVS Health’s current market cap stands at $117.86 billion.
Compared to other peers in the Health Care Plans sector, CVS Health has outperformed in terms of quarterly revenue growth year over year at 0.11 vs. the industry average of 0.00. CVS Health’s earnings per share is currently at 4.08, which surpasses the sector average of 2.83.
CVS Health is currently covered by 25 Wall Street analysts. The mean target price is $113.48 according to First Call. This presents a solid upside to the current price of the equity. The Mean Recommendation sits at 1.8 which is based on 9 Strong Buy, 13 Buy and 3 Hold ratings.
The most recent analyst actions consisted of Standpoint Research initiating the stock on May 19th and ISI Group initiating coverage with an upgrade rating back in January.
The current quarter EPS consensus estimate is 1.20 with revenue estimates of 37.18B. Sales are expected to grow at a 7.50% rate. CVS Health reported actual earnings last quarter of 1.14 which beats the 1.08 consensus estimate, a 5.60% surprise.
CVS Health Corporation, together with its subsidiaries, provides integrated pharmacy health care services in the United States. The company operates through Pharmacy Services and Retail Pharmacy segments. The Pharmacy Services segment offers pharmacy benefit management services, such as plan design and administration, formulary management, Medicare Part D services, mail order and specialty pharmacy services, retail pharmacy network management services, prescription management systems, clinical services, disease management programs, and medical pharmacy management services. This segment serves employers, insurance companies, unions, government employee groups, health plans, managed Medicaid plans and plans offered on public and private organizations, other sponsors of health benefit plans, and individuals under the CVS/caremark Pharmacy Services, Caremark, CarePlus CVS/pharmacy, RxAmerica, Accordant, SilverScript, Coram CVS/specialty, NovoLogix, and Navarro Health Services names. The Retail Pharmacy segment sells prescription drugs, over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, seasonal merchandise, and greeting cards, as well as provides photo finishing services. As of December 31, 2014, it operated 7,822 retail drugstores, 860 health care clinics, 17 onsite pharmacy stores, 27 retail specialty pharmacy stores, 11 specialty mail order pharmacies, 4 mail service dispensing pharmacies, and 86 branches, as well as 6 centers of excellence for infusion and enteral services.