Express Scripts Inc. (ESRX) is en route to implement its proposed merger with Medco Health Solutions, Inc. (MHS), as the company’s stockholders gave the green signal for the adoption of the agreement and plan of merger, dated July 20, 2011.
In July this year, Express Scripts had agreed to acquire Medco for $29.1 billion ($71.36 per share) in cash and stock. At the time of announcing the deal, Express Scripts announced that Medco shareholders will receive $28.80 in cash and 0.81 shares of Express Scripts for each share of Medco that they own.
Following the closure of the acquisition, which is expected in the first half of 2012, Express Scripts’ shareholders will own approximately 59% of the merged entity, with Medco’s shareholders holding the remaining percentage.
In a span of few years, this will be the third major acquisition for Express Scripts.
In July 2008, Express Scripts acquired the Pharmacy Services Division of Medical Services Company. Medical Services Company is a leader in providing pharmacy benefit management (PBM) services to clients, providing workers compensation benefits. Further, in December 2009, Express Scripts acquired NextRx, WellPoint Inc.‘s (WLP) PBM segment. The deal significantly expanded Express Scripts PBM business. Finally, the acquisition of Medco Health is expected to help lower the cost of prescription drugs and improve the quality of healthcare, thereby attracting more patients.
However, recently Express Scripts and WellPoint voiced concerns about a contractual dispute. WellPoint said that it differs from Express Scripts on the contractual interpretation of certain terms in the agreement and certain operational matters associated with Express Scripts’ performance.
While WellPoint is threatening to drag Express Scripts to court regarding the matter, Express Scripts is hopeful of a mutual settlement.
Currently, we have a Neutral recommendation on Express Scripts. The stock carries a Zacks #3 Rank (Hold rating) in the short-run.
To read this article on Zacks.com click here.
Zacks Investment Research
