CVS Health in advance talks to acquire Omnicare

CVS Health Corporation on Thursday announced that it intends to buy pharmacy services provider Omnicare Inc, with a view to expand its presence in the senior care market.

The deal was struck at $12.7 billion, including Omnicare’s debt of about $2.3 billion. Omnicare is the nation's largest provider of pharmaceutical services in nursing homes and has 160 locations in assisted living and long-term care facilities in 47 states in the U.S.

Health care company CVS Health operates over 7,700 CVS Pharmacy and drugs stores, a pharmacy benefit manager, mail order and specialty pharmacies, a retail-based health clinic subsidiary, MinuteClinic and an online pharmacy, CVS.com.

CVS has offered Omnicare $98 per share, which is a 4 percent markup from the share’s Wednesday’s closing price. CVS maintained that the deal would add up to 20 cents to adjusted earnings per share in 2016. This led to a 1.2 percent surge in the stock of Omnicare, to end at $95.75, while CVS’s shares gained 1.6 percent and closed at $102.90, on Thursday.

For the present deal, Barclays and Evercore are CVS's financial advisers, wherein CVS secured $13 billion in financing from Barclays. Omnicare is seeking advice from Bank of America Merrill Lynch and Centerview Partners. CVS's legal adviser is Sullivan & Cromwell LLP, while White & Case LLP served as Omnicare's legal counsel.

CVS hopes to capture the senior patient population, called ‘baby boomers’, the segment that formed the highest-cost medication users in 2014. This category aged between 50-75, on an average suffer from two or more medical conditions that require medication. It has seen a growth of 39.2 percent in the last decade. According to estimates by the Congressional Budget Office, by 2050, one-fifth of the total U.S. population will be 65 or older.

The deal has already been approved by the boards of both companies and is expected to close towards the end of 2015.

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