Joins Two of the Country's Fastest Growing, Innovative and
Highly Complementary PBMs;
Combination Will Offer Comprehensive Suite of
Best-in-Class Services and Customized Solutions
Increased Size and Scale Will Enable $13 Billion Combined Company to Better Serve
Clients and Capitalize on Significant Growth
Opportunities
Transaction Expected to be Highly Accretive to 2013
Results
LISLE, IL and ROCKVILLE, MD, April
18, 2012 /PRNewswire/ - SXC Health Solutions Corp. (NASDAQ:
SXCI, TSX: SXC) and Catalyst Health Solutions, Inc. (NASDAQ: CHSI)
today announced that their Boards of Directors have unanimously
approved a definitive merger agreement under which SXC and Catalyst
will combine in a cash and stock transaction valued at
approximately $4.4 billion.
Under the terms of the agreement, Catalyst shareholders will
receive $28.00 in cash and 0.6606
shares of SXC stock for each Catalyst share, which implies a
purchase price of $81.02 per Catalyst
share and a premium of approximately 28% based on the closing stock
prices of SXC and Catalyst on April 17,
2012.
The transaction will join SXC's industry-leading pharmacy
benefit management (PBM) tools, technology and expertise with
Catalyst's local and collaborative client-centric PBM business
model, creating a leading independent provider of PBM
solutions. Together, SXC and Catalyst will provide plan
sponsors, members and physicians with a comprehensive suite of
customized solutions to reduce pharmacy and healthcare costs and
improve patient outcomes. Upon completion of the transaction,
the combined company will be an organization with $13 billion in revenue, which will be
headquartered in Lisle, Illinois
and will maintain a presence in Rockville, Maryland. SXC is also
committed to Catalyst's industry-recognized approach to client
service and intends to maintain and expand Catalyst's proven
"Centers of Excellence" strategy.
The transaction is expected to be highly accretive to SXC's
non-GAAP earnings in 2013, which excludes transaction-related
amortization expected to be approximately $200 million in the first twelve months after
closing. The combined company expects to achieve approximately
$125 million of annual cost synergies
over the first 18 to 24 months after closing through improved scale
and operating leverage. The combined company expects to incur
approximately $40-45 million of
transition expenses to achieve these annual synergies. SXC
expects annual interest expense to be approximately $70 million due to financing the transaction with
$1.7 billion in debt. Upon
closing, the combined company will have a strong balance sheet and
attractive cash flow, giving it substantial financial flexibility
to pursue continued growth initiatives while paying down debt.
"This is an extremely compelling combination that brings
together SXC's industry-leading tools and technology with
Catalyst's full-service PBM, best-in-class service and growing
client base to create a company that is even better positioned to
compete in the marketplace," said Mark
Thierer, Chairman and Chief Executive Officer of SXC, who
will continue in that role in the combined company. "SXC and
Catalyst have become two of the fastest growing independent PBMs
because we share a client-centered approach to lowering healthcare
costs and improving the lives of our members. By joining
forces, we will be able to accelerate our shared goal of providing
affordable and high quality healthcare solutions that enhance value
for employer, health plan and government customers."
Mr. Thierer continued, "The combined company's increased scale
and unique value proposition, which is centered on flexibility and
customized offerings, will create significant opportunities to
broaden our ability to serve the needs of our clients and members,
further enhancing our growth potential and creating value for all
of our shareholders."
"Catalyst has long been a distinguished leader in our industry,
and the combined company will continue to provide the same high
quality, localized approach and service to customers for which
Catalyst is known," said David T.
Blair, Chairman and Chief Executive Officer of
Catalyst. "This transaction will create significant benefits
for our clients through a broader range of product offerings, more
effective cost management, and increased investment in innovative
programs and technologies."
Mr. Blair continued, "Catalyst has achieved enormous success
over the past 10 years and, while we are confident in our future
prospects as a standalone company, the opportunities presented by
this combination are more compelling. This transaction
provides attractive and immediate value to Catalyst shareholders,
as well as the ability to participate in the significant upside
potential of the combined company. In addition, this
transaction enhances our ability to serve the needs of our clients
and positions the combined company for long-term success in our
rapidly evolving industry."
Mr. Thierer will serve as Chairman and CEO of the combined
organization, and Jeff Park will be
its EVP and Chief Financial Officer. Mr. Blair has committed
to provide ongoing support to the combined company to ensure a
seamless and successful integration. Following the close of the
transaction, the SXC Board of Directors will include two current
Catalyst directors.
Strategic Benefits of the Transaction
- Highly Complementary Businesses with Best-In-Class Services
and Solutions. SXC's industry-leading PBM tools and
technology and specialty pharmacy offerings are complementary to
Catalyst's market-leading client service and clinical model that
emphasizes local solutions and member choice. With flexible
and customized services and solutions, the combined company will be
better positioned to meet the needs of a more diverse client base
that includes large employers, managed care organizations, state
and local governments, hospice, fee-for-service Medicaid, long-term
care, and workers' compensation clients, among others.
- Enhanced Size and Scale to Deliver More Cost-Effective
Solutions. The combined company will leverage its
enhanced size and scale to create more efficiency in the supply
chain and generate greater cost savings for plan sponsors and
members. The combined company will cover approximately 25
million members, with annual prescription volume of more than 200
million adjusted PBM scripts.
- Strong Position in Key Growth Areas. Together, SXC
and Catalyst will be uniquely positioned to capitalize on key areas
of growth in the evolving healthcare market, including positive
trends in drug utilization, greater member engagement, specialty
pharmacy benefit programs, new biosimilar introductions, home
delivery, generic utilization, and increases in the number of
insured lives.
- Well Positioned for Healthcare Reform. With the
impending U.S. Supreme Court decision surrounding the Affordable
Care Act, the combined company is well positioned to capitalize on
the changes, regardless of the outcome. SXC has a strong
fee-for-service Medicaid offering, as well as a complete Medicare
and Managed Medicaid product line. Additionally, the
company's technology tool set is being used today to help build out
health exchanges, ACO's and PCMH models throughout the
country.
Transaction Terms
Under the terms of the agreement, Catalyst shareholders will
receive $28.00 in cash and 0.6606
shares of SXC stock for each Catalyst share they own upon closing
of the transaction. Based on the closing price of SXC on
April 17, 2012, the stock component
is valued at $53.02 per share, which
brings the total consideration per share to Catalyst shareholders
to $81.02. Upon closing of the
transaction, SXC shareholders are expected to own approximately 65%
of the combined company, and Catalyst shareholders are expected to
own approximately 35%.
Financing and Approvals
SXC has secured fully committed financing from J.P. Morgan Chase
Bank, N.A. for the cash portion of the transaction.
The transaction, which is subject to approval by SXC and
Catalyst shareholders, U.S. antitrust approval and other customary
closing conditions, is expected to close in the second half of
2012.
Financial Guidance
SXC and Catalyst will each release first quarter 2012 unaudited
financial results on May 3,
2012. Both companies today reaffirmed their full-year
2012 guidance excluding the costs related to this proposed
transaction, which for SXC is expected to be approximately
$25 million.
Advisors
J.P. Morgan acted as lead financial advisor and Barclays acted as
financial advisor to SXC, and Sidley Austin LLP acted as its legal
counsel. Goldman, Sachs & Co. acted as lead financial
advisor and Citi acted as financial advisor to Catalyst, and
Milbank, Tweed, Hadley & McCloy acted as its legal counsel.
Conference Call
SXC and Catalyst will host a conference call today Wednesday, April 18, 2012, at 8:30 a.m. Eastern time to discuss the
combination. To participate, call (888) 231-8191 fifteen
minutes prior to the scheduled start time. A replay will be
available for one week following the call until Wednesday, May 2, 2012 at midnight ET. In addition, an audio web cast
of the call will be available live and will be archived on the
investor relations portions of both company's web sites. To
access the replay, call (855) 859-2056 and enter access code
73167559.
A live audio webcast of the conference call will be available at
www.sxc.com, www.catalysthealthsolutions.com, and www.newswire.ca.
Please connect at least 15 minutes prior to the conference call to
ensure adequate time for any software download that may be required
to join the webcast.
About SXC
Ranked number one on the 2011 Fortune 100 List of Fastest
Growing Companies, SXC Health Solutions Corp. is a leading
provider of pharmacy benefits management (PBM) services and Health
Care Information Technology (HCIT) solutions to the healthcare
benefits management industry. SXC's product offerings and solutions
combine a wide range of PBM services and software applications,
application service provider (ASP) processing services and
professional services, designed for many of the largest
organizations in the pharmaceutical supply chain, such as health
plans, employers, federal, provincial, and, state and local
governments, pharmacy benefit managers, retail pharmacy chains and
other healthcare intermediaries. SXC is headquartered in
Lisle, Ill., with multiple
locations in the U.S. and Canada.
For more information please visit www.sxc.com.
About Catalyst
Catalyst Health Solutions, Inc., the fastest growing national PBM
in the U.S., is built on strong, innovative principles in the
management of prescription drug benefits and provides an unbiased,
client-centered philosophy resulting in industry-leading client
retention rates. Catalyst's subsidiaries include Catalyst Rx, a
full-service PBM serving more than 18 million lives in the United States and Puerto Rico; HospiScript Services, LLC, one of
the largest providers of PBM services to the hospice industry;
FutureScripts, LLC, a full-service PBM serving approximately one
million lives in the mid-Atlantic region; and a fully integrated
prescription mail service facility. Catalyst's clients include
self-insured employers, including state and local governments,
managed care organizations, unions, hospices, third-party
administrators and individuals.
SXC Forward-Looking Statements
Certain statements included in this communication, including
those that express management's expectations or estimates of SXC's
or the combined company's future performance, constitute
"forward-looking statements" within the meaning of applicable
securities laws. Forward-looking statements are necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by management at this time, are inherently subject to
significant business, economic and competitive uncertainties and
contingencies. SXC cautions that such forward-looking statements
involve known and unknown risks, uncertainties and other risks that
may cause SXC's actual financial results, performance, or
achievements to be materially different from SXC's estimated future
results, performance or achievements expressed or implied by those
forward-looking statements. Numerous factors could cause actual
results to differ materially from those in the forward-looking
statements, including without limitation, SXC's ability to achieve
increased market acceptance for SXC's product offerings and
penetrate new markets; consolidation in the healthcare industry;
the existence of undetected errors or similar problems in SXC's
software products; SXC's ability to identify and complete
acquisitions, manage SXC's growth and integrate acquisitions; SXC's
ability to compete successfully; potential liability for the use of
incorrect or incomplete data; the length of the sales cycle for
SXC's healthcare software solutions; interruption of SXC's
operations due to outside sources; SXC's dependence on key
customers; maintaining SXC's intellectual property rights and
litigation involving intellectual property rights; SXC's ability to
obtain, use or successfully integrate third-party licensed
technology; compliance with existing laws, regulations and industry
initiatives and future change in laws or regulations in the
healthcare industry; breach of SXC's security by third parties;
SXC's dependence on the expertise of SXC's key personnel; SXC's
access to sufficient capital to fund SXC's future requirements; and
potential write-offs of goodwill or other intangible assets. This
list is not exhaustive of the factors that may affect any of SXC's
forward-looking statements. Other factors that should be considered
are discussed from time to time in SXC's filings with the U.S.
Securities and Exchange Commission (the "SEC"), including the risks
and uncertainties discussed under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in SXC's 2011 Annual Report on Form 10-K and
subsequent Form 10-Qs, which are available at www.sec.gov.
Investors are cautioned not to put undue reliance on forward-
looking statements. All subsequent written and oral forward-looking
statements attributable to SXC or persons acting on SXC's behalf
are expressly qualified in their entirety by this cautionary
statement. SXC disclaims any intent or obligation to update
publicly these forward-looking statements, whether as a result of
new information, future events or otherwise.
Certain of the assumptions made in preparing forward-looking
information and management's expectations include: maintenance of
SXC's existing customers and contracts, SXC's ability to market
SXC's products successfully to anticipated customers, the impact of
increasing competition, the growth of prescription drug utilization
rates at predicted levels, the retention of SXC's key personnel,
SXC's customers continuing to process transactions at historical
levels, that SXC's systems will not be interrupted for any
significant period of time, that SXC's products will perform free
of major errors, SXC's ability to obtain financing on acceptable
terms and that there will be no significant changes in the
regulation of SXC's business.
Catalyst Forward Looking Statements
Certain statements included herein may contain certain
forward-looking statements including, without limitation,
statements concerning Catalyst's operations, economic performance
and financial condition. The words "believe," "expect,"
"anticipate," "will," "could," "would," "should," "may," "plan,"
"estimate," "intend," "predict," "potential," "continue," and the
negatives of these words and other similar expressions generally
identify forward-looking statements. In addition to
Catalyst's expectations or estimates of a combined company's future
performance or matters relating to the proposed transaction, these
forward-looking statements may include statements addressing
Catalyst's operations and Catalyst's financial performance.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which, among other things, speak only
as of their dates. These forward-looking statements are based
largely on Catalyst's current expectations and are based on a
number of risks and uncertainties, including, without limitation,
(i) general adverse economic conditions, (ii) changes in
governmental laws and regulations, (iii) Catalyst's ability to
compete effectively in the pharmacy benefit management industry,
(iv) Catalyst's relationships with key clients, pharmacy
network affiliations and various pharmaceutical manufacturers and
rebate intermediaries, (v) changes in industry pricing
benchmarks, (vi) uncertainties relating to the transition and
integration of completed and future acquisitions and/or expansion
opportunities, (vii) Catalyst's current level of indebtedness
and any future indebtedness Catalyst may incur;
(viii) disruption in Catalyst's operations,
(ix) unanticipated changes in Catalyst's ability to execute
its growth strategy, * generic utilization levels,
(xi) insufficient insurance coverage to cover costs associated
with litigation, (xii) Catalyst's ability to accurately
estimate how much future revenue Catalyst will generate, as well as
the level of implementation and transaction costs that Catalyst
will incur, under newly commenced PBM agreements and other risks
and uncertainties discussed in Catalyst's filings with the SEC,
including Catalyst's Annual Report on Form 10-K and quarterly
reports on Form 10-Q. Actual results could differ
materially from results referred to in the forward-looking
statements. In light of these risks and uncertainties, there
can be no assurances that the results referred to in the
forward-looking statements contained herein will, in fact,
occur. Catalyst undertakes no obligation to revise any
forward-looking statements in order to reflect events or
circumstances that may arise after the date hereof. Readers
are urged to carefully review and consider the various disclosures
made in Catalyst's other filings with the SEC that attempt to
advise interested parties of the risks and factors that may affect
Catalyst's business.
Transaction Forward-Looking Statements
In addition, numerous factors could cause actual results with
respect to the proposed transaction to differ materially from those
in the forward-looking statements, including without limitation,
the possibility that the expected efficiencies and cost savings
from the proposed transaction will not be realized, or will not be
realized within the expected time period; the risk that the SXC and
Catalyst businesses will not be integrated successfully; the
ability to obtain governmental approvals of the proposed
transaction on the proposed terms and schedule contemplated by the
parties; the failure of shareholders of SXC or Catalyst to approve
the proposed transaction; disruption from the proposed transaction
making it more difficult to maintain business and operational
relationships; the risk of customer attrition; the possibility that
the proposed transaction does not close, including, but not limited
to, due to the failure to satisfy the closing conditions; and the
ability to obtain the financing contemplated to fund a portion of
the consideration to be paid in the proposed transaction and the
terms of such financing.
Important Additional Information
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication is being made in
respect of the proposed transaction involving Catalyst and
SXC. The proposed transaction will be submitted to the
shareholders of Catalyst and the shareholders of SXC for their
consideration. In connection therewith, the parties intend to
file relevant materials with the SEC, including a joint proxy
statement/prospectus that will be mailed to shareholders.
Such documents, however, are not currently available. BEFORE
MAKING ANY VOTING OR INVESTMENT DECISIONS, INVESTORS AND SECURITY
HOLDERS OF CATALYST AND/OR SXC ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY
OTHER RELEVANT DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY
AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders may obtain free copies of the proxy
statement/prospectus and other documents containing important
information about Catalyst and SXC, once such documents are filed
with the SEC, through the website maintained by the SEC at
www.sec.gov. Copies of the documents filed with the SEC by
SXC will be available free of charge on SXC's website at
www.sxc.com under the heading "Investor Information" or by
contacting SXC's Investor Relations Department at
630-577-3100. Copies of the documents filed with the SEC by
Catalyst will be available free of charge on Catalyst's website at
www.catalysthealthsolutions.com under the heading "Investor
Information" or by contacting Catalyst's Investor Relations
Department at 301-548-2900.
SXC, Catalyst and certain of their respective directors,
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
connection with the proposed transaction. Information about
the directors and executive officers of SXC is set forth in its
proxy statement for its 2012 annual meeting of stockholders, which
was filed with the SEC on April 2,
2012. Information about the directors and executive
officers of Catalyst is set forth in its proxy statement for its
2011 annual meeting of shareholders, which was filed with the SEC
on April 28, 2011. These
documents can be obtained free of charge from the sources indicated
above. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the joint proxy statement/prospectus and other relevant materials
to be filed with the SEC when they become available.
SOURCE SXC Health Solutions Corp.