Market Overview

SXC and Catalyst to Combine; $13 Billion Combined Company


SXC Health Solutions Corp. (NASDAQ: SXCI) and Catalyst Health Solutions, Inc. (NASDAQ: CHSI) today announced that their Boards of Directors have unanimously approved a definitive merger agreement under which SXC and Catalyst will combine in a cash and stock transaction valued at approximately $4.4 billion. Under the terms of the agreement, Catalyst shareholders will receive $28.00 in cash and 0.6606 shares of SXC stock for each Catalyst share, which implies a purchase price of $81.02 per Catalyst share and a premium of approximately 28% based on the closing stock prices of SXC and Catalyst on April 17, 2012.

The transaction will join SXC's industry-leading pharmacy benefit management (PBM) tools, technology and expertise with Catalyst's local and collaborative client-centric PBM business model, creating a leading independent provider of PBM solutions. Together, SXC and Catalyst will provide plan sponsors, members and physicians with a comprehensive suite of customized solutions to reduce pharmacy and healthcare costs and improve patient outcomes. Upon completion of the transaction, the combined company will be an organization with $13 billion in revenue, which will be headquartered in Lisle, Illinois and will maintain a presence in Rockville, Maryland. SXC is also committed to Catalyst's industry-recognized approach to client service and intends to maintain and expand Catalyst's proven "Centers of Excellence" strategy.

The transaction is expected to be highly accretive to SXC's non-GAAP earnings in 2013, which excludes transaction-related amortization expected to be approximately $200 million in the first twelve months after closing. The combined company expects to achieve approximately $125 million of annual cost synergies over the first 18 to 24 months after closing through improved scale and operating leverage. The combined company expects to incur approximately $40-45 million of transition expenses to achieve these annual synergies. SXC expects annual interest expense to be approximately $70 million due to financing the transaction with $1.7 billion in debt. Upon closing, the combined company will have a strong balance sheet and attractive cash flow, giving it substantial financial flexibility to pursue continued growth initiatives while paying down 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," said Mark Thierer, Chairman and Chief Executive Officer of SXC, who will continue in that role in the combined company. "SXC and Catalyst have become two of the fastest growing independent PBMs because we share a client-centered approach to lowering healthcare costs and improving the lives of our members. By joining forces, we will be able to accelerate our shared goal of providing affordable and high quality healthcare solutions that enhance value for employer, health plan and government customers."

Posted-In: News M&A


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