CVS to buy pharmacy services provider Omnicare for $10.1 billion

A CVS pharmacy is seen in New York City in this July 28, 2010 file photo. CVS Health Copr, the No. 2 U.S.

Reuters/Mike Segar

CVS Health Corp (CVS.N), the second-largest U.S. drugstore operator, said on Thursday it will buy pharmacy services provider Omnicare Inc (OCR.N) for $10.1 billion to expand in the growing market serving the senior patient population.The number of people aged between 55 and 64, commonly called baby boomers, having two or more chronic conditions that require medication grew 39.2 percent in the last decade, according to the Centers for Disease Control and Prevention's latest report.
Baby Boomers surpassed all other age groups as the highest-cost medication users in 2014, according to a report from Express Scripts, the largest U.S. pharmacy benefit manager.
CVS offered $98 per Omnicare share, representing a premium of 4 percent to Omnicare's closing price on Wednesday.
The offer is at a nearly 21 percent premium to Omnicare's April 21 close, the day before Bloomberg reported that the company was exploring a sale.
Shares of Omnicare, the top U.S. provider of pharmacy services to
the elderly, rose 1.2 percent to $95.75 in premarket trading. CVS's stock was up 1.6 percent at $102.90 in light trading on Thursday.
The deal comes at a time when pharmacy benefit managers and pharmacy chain operators are consolidating to negotiate better prices with drugmakers.
Rite Aid Corp (RAD.N) bought pharmacy benefit manager EnvisionRx for about $2 billion in February, while health insurer UnitedHealth Group Inc (UNH.N) agreed to buy Catamaran Corp (CTRX.O) (CCT.TO) for about $12.8 billion in March.
"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 on Wednesday.
Bloomberg first reported on Wednesday that CVS was nearing a deal to buy Omnicare.
CVS said 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.
CVS said it expects the deal to add about 20 cents to adjusted earnings per share in 2016.
The deal values Omnicare at about $12.7 billion, including debt of about $2.3 billion, the companies said.
CVS said it had secured $13 billion in financing from Barclays for the deal, which is expected to close near the end of 2015.
Barclays and Evercore are CVS's financial advisers, while Bank of America Merrill Lynch and Centerview Partners advised Omnicare.
CVS's legal adviser is Sullivan & Cromwell LLP, while White & Case LLP served as Omnicare's legal counsel.
(This version of the story corrects to "people aged between 55 and 64" from "people aged between 50-75" in paragraph 2)
(Reporting by Sruthi Ramakrishnan and Vidya L Nathan in Bengaluru; Editing by Sriraj Kalluvila)