CHSI Catalyst Health Solutions, (MM)

Catalyst Health Solutions, Inc. (CHSI) has priced its public offering of 5.5 million shares of common stock at a price of $53.00 per share.

According to the Securities and Exchange Commission, Catalyst Health will sell 4.5 million shares and the remaining 1 million shares will be sold by one of its stockholders, Principal Holding Company, LLC, a subsidiary of Principal Financial Group, Inc. (PFG) in an underwritten public offering.

Catalyst Health has allowed the underwriters a 30-day option to cover over-allotments up to an additional 825,000 shares from the selling stockholder, though the company will not receive any proceeds from the sale of shares by the selling stockholder.

Further, Catalyst Health is expected to close the offering on April 13. Goldman, Sachs & Co., a unit of The Goldman Sachs Group, Inc. (GS), and Citigroup Inc. (C) will act as the joint book-running managers for this stock offering, while SunTrust Robinson Humphrey, Inc., a unit of SunTrust Banks Inc. (STI) and Wells Fargo Securities, LLC, a unit of Wells Fargo & Company (WFC) will become the joint lead managers.

Catalyst Health is expected to utilize the net proceeds to partially fund the company’s previously announced acquisition of Walgreens Health Initiatives, Inc. (“WHI”), which is a pharmacy benefit management (“PBM”) business of  Walgreen Co. (WAG). However, Catalyst Health will use the net proceeds for general purposes, if the acquisition does not close.

On March 9, Catalyst Health had agreed to acquire WHI for $525 million in cash. Additionally, Walgreen anticipated the deal to be EPS-neutral in fiscal 2012. Furthermore, the acquisition is expected to close in the first half of calendar 2011, subject to closing conditions.

Subsequent to this deal, Walgreen will be able to better focus on its 7,700 drug stores. Through this transaction, Catalyst Health will expand its PBM business and raise its membership to more than 18 million.

Catalyst Health had posted strong fourth-quarter 2010 earnings of 56 cents per share, surpassing the Zacks Consensus Estimate of 52 cents. In fiscal 2010, Catalyst Health posted adjusted earnings of $1.93, which exceeded the Zacks Consensus Estimate of $1.88.

During the fourth quarter, Catalyst Health also closed the acquisition of the Independent Blue Cross’ (IBC) FutureScripts subsidiaries in September, 2010 for an all cash transaction of $225 million, which includes the value of a future tax benefit for Catalyst Health. 

Currently, Catalyst Health carries a Zacks #2 Rank, which translates into a short-term Buy recommendation, indicating a slig ht upward pressure on the shares over the near term.

 
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