By Lisa Kerner
Charlotte, N.C., Feb. 26 - SXC Health Solutions Corp. agreed to acquire National Medical Health Card Systems, Inc. in a stock and cash deal valued at approximately $143 million as part of SXC's "strategic evolution towards leadership in pharmacy spend management," the company announced on Tuesday.
The estimated purchase price of $11 per National Medical Health Card share will be funded with a combination of 70% cash and 30% SXC stock.
For each share held, National Medical Health Card stockholders will receive $7.70 in cash and 0.217 of a share of SXC common stock.
Both companies' boards of directors have unanimously approved the transaction, and National Medical Health Card's majority shareholders, with a 55% stake in the company, agreed to tender shares into the offer.
The acquisition is expected to close in the second quarter, subject to regulatory approvals, a requisite number of National Medical Health Card common shares being tendered into the offer and financing.
SXC said it plans to finance a portion of the purchase price through a secured $48 million term loan combined with a $10 million revolving credit facility from a syndicate led by GE Healthcare Financial Services.
The combined company, to be renamed informedRx, is expected to have about 24 million basic shares outstanding once the acquisition is complete, composed of 21 million currently outstanding shares of SXC common stock and 2.9 million shares of SXC common stock to be issued to National Medical Health Card shareholders.
SXC anticipates cost savings of up to $8 million in the first 12 months post-closing, jumping to as much as $14 million in year two. Revenue synergy opportunities include network and rebate optimization, as well as in cross-sell opportunities with clinical programs, specialty pharmacy and mail service pharmacy, the release stated.
The acquisition is expected to be dilutive to SXC's earnings per share in fiscal 2008 and accretive after that.
"NMHC's base of 300 customers and 2.3 million lives under management, coupled with its established mail-order and specialty pharmacy operations, expands the capabilities of our full-service [pharmacy benefits management] offering and is complementary to our traditional software license and [application service provider] business," SXC chairman and chief executive officer Gordon S. Glenn said in a company news release.
"In addition, NMHC has valuable relationships with industry consultants and provides us with a customer base that has critical mass with third-party administrators, managed Medicaid, state governments and Taft-Hartley organizations," Glenn added.
Glenn will lead the combined company as chairman and CEO from SXC's Lisle, Ill., location.
SXC's Mark Thierer will remain president and chief operating officer, and Jeff Park will remain senior vice president, chief financial officer and secretary.
Houlihan Lokey and Healthcare Growth Partners advised SXC, while National Medical Health Card was advised by JPMorgan.
National Medical Health Card is a pharmacy benefits management services company based in Port Washington, N.Y.
SXC also provides pharmacy benefits management services as well as information technology solutions to the health care benefits management industry.
| Acquirer: | SXC Health Solutions Corp.
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| Target: | National Medical Health Card Systems, Inc.
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| Announcement date: | Feb. 26
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| Transaction total: | $143 million
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| Price per share: | $7.70 in cash and 0.217 of an SXC share
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| Expected closing: | Second quarter of 2008
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| Stock price for acquirer: | Nasdaq: SXCI: $15.95 on Feb. 25
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| Stock price of target: | Nasdaq: NMHC: $9.85 on Feb. 25
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