Health insurer UnitedHealth Group agreed to buy Catamaran Corp in a deal worth about $12.8 billion to boost its pharmacy benefit business as it competes with bigger rivals such as Express Scripts Holdings Co.
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Pharmacy benefit managers (PBM) administer drug benefits for employers and health plans and run large mail order pharmacies, helping them get better prices from drugmakers.
As employers look to cut prescription costs on expensive drugs, the deal with Catamaran will give UnitedHealth's pharmacy benefits unit, OptumRx, the scale to negotiate favorable prices in the lucrative PBM market.
Catamaran was formed after SXC Health Solutions and PBM Catalyst Health Solutions merged in 2012.
UnitedHealth's offer of $61.50 per share represents a premium of 27 percent to Catamaran's Friday close on the Nasdaq.
Catamaran's stock was trading at $60.01 premarket on Monday, while UnitedHealth was up nearly 4 percent.
The deal "makes sense to us, but admittedly came much earlier than we expected," Jefferies analyst Brian Tanquilut said in a research note.
"We had always viewed Catamaran as a compelling asset for companies looking for scale in the PBM sector such as Optum or Walgreens but expected Catamaran to grow the business much further before pursuing a sale."
He added that the offer seemed adequate and he did not expect competing bids at this point.
UnitedHealth said it expects to fill more than one billion prescriptions after the deal.
The deal value is based on Illinois-based Catamaran's total diluted shares outstanding as of Dec. 31.
The transaction is expected to close in the fourth quarter of 2015 and add about 30 cents per share to UnitedHealth's profit in 2016, the companies said.
After the deal closes, Catamaran Chief Executive Mark Thierer will serve as CEO of OptumRx. Timothy Wicks, the current CEO of OptumRx, will become president. (Editing by Savio D'Souza and Saumyadeb Chakrabarty)