CVS Health Acquires Omnicare for $12.7 Billion

CVS Health Corporation has agreed to buy pharmacy services provider Omnicare Inc. for about $12.7 billion, aimed at boosting the company’s services for the elderly.

The companies announced that they have entered into a definitive agreement for CVS Health to acquire Omnicare, the leading provider of pharmacy services to long term care facilities. The value of the deal is approximately $12.7 billion, which includes approximately $2.3 billion in debt.

The acquisition will significantly expand CVS Health’s ability to dispense prescriptions in assisted living and long term facilities, serving the senior patient population. The drugstore giant said that the deal will also expand its presence in the specialty pharmacy business. Omnicare has 160 locations in 47 states across the US, and has approximately 13,000 employees.

“The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel,” said Larry Merlo, President and CEO of CVS Health. “It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of senior and chronic care patients as they transition across the care continuum. We have been impressed by the Omnicare team and what they have created for the patients they serve.”

The long term care segment of the health care system is expected to grow given the aging US population. More people are expected to use assisted living facilities and independent living communities in the next few decades, creating a substantial growth opportunity for companies serving this sector. Omnicare’s complementary specialty pharmacy platform and clinical expertise will augment CVS Health’s capabilities and enable CVS Health to continue to provide innovative and cost-effective solutions to patients and payors.

CVS said that it will spend $98 in cash for each Omnicare share, representing a 6.1 percent premium to Omnicare’s closing price on Wednesday. The acquisition has been approved by both companies’ Boards of Directors.

CVS expects the transaction to be approximately 20 cents accretive to Adjusted EPS in 2016, its first full year, excluding integration and any one-time transaction costs. It is expected to become increasingly accretive to Adjusted EPS in subsequent years.

“We are pleased to have reached this agreement with CVS Health, one of the leading companies in the helath care industry, which we believe will allow us to accelerate our mission of enhancing the quality and cost-effectiveness of care for complex patient populations,” said Nitin Sahney, President and CEO of Omnicare. “This exciting combination is the result of a broad and thorough review of our strategic options. On behalf of the Omnicare team, I’d like to thank our 13,000 employees whose hard work and dedication has enabled Omnicare to become a recognized leader in pharmacy services.”

The deal is the latest acquisition related to how drugs are sold and distributed. The pharmaceutical sector has been consolidating to enhance their company and negotiate for lower prices from drug manufacturers and US drug distributors.

In February, Rite Aid acquired Envision Pharmaceutical Services for $2 billion. Additionally, in March, UnitedHealth Group signed a deal to acquire Catamaran, one of the largest US pharmacy benefit managers (PBMs) for $12.8 billion.

Source: CVS Health

Last updated: 5/21/15; 5:30pm EST

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