CVS to purchase Omnicare for $10.4bn

<p>The United States’ second largest drugstore operator is targeting the senior patient population.</p>

US drugstore operator CVS Health Corp announced today (May 21st) it will buy pharmacy services provider Omnicare Inc for $10.4 billion (£6.6 billion), offering $98 per Omnicare share.

The deal values Omnicare – the top US provider of pharmacy services to the elderly – at about $12.7 billion, including debt of about $2.3 billion, the companies said.

CVS, the United States' second largest drugstore company said it is looking to expand in the growing market serving the senior patient population, and the deal would increase its ability to dispense prescriptions in assisted-living and long-term-care facilities.

The company added the deal will also help expand its presence in the rapidly growing specialty pharmacy business, which sells high-cost drugs to treat complex or rare conditions.

The deal will "significantly expand" CVS' business

In 2014, Omnicare’s specialty care segment had revenue of $1.67 billion, up 20 per cent from the year before, the Wall Street Journal reports.

“The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy-dispensing channel,” CVS Health chief executive Larry Merlo said in a press release.

CVS said it expects the deal to add about 20 cents to adjusted earnings per share in 2016.

"Both (CVS and Omnicare) are big Part D players and there could be some scale benefits in negotiating with other payors," Cowen & Co analyst Charles Rhyee wrote in a note seen by Reuters.

The deal comes a few weeks after health insurer UnitedHealth Group Inc purchased Catamaran Corp for $12.8 billion in March and after Rite Aid Corp bought pharmacy benefit manager EnvisionRx for $2 billion in February.

Shares of Omnicare rose 1.2 per cent to $95.75 in premarket trading, while CVS's stock gained 1.6 per cent at $102.90.

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