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 - 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.
FinancialGuidance
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.
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, (x) 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