Why PharMerica Soared 13.4% Today
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What: After reports that the company may be open to being acquired, shares in PharMerica Corporation (NYSE: PMC) rallied 13.4% today.
So what:Weeks after announcing the retirement of its CFO and years after fighting off a takeover attempt by Omnicare, specialty pharmacy player PharMerica Corporation may be ready to deal.
According to Reuters, PharMerica has enlisted the efforts of investment bankers to test the waters on a potential sale. The company may find significant interest, given that large pharmacy benefit managers, including CVS Health (NYSE: CVS), have been gobbling up smaller players over the past few years. CVS Health bought Omnicare for $12.7 billion, including debt, late last year, and Omnicare competes against PharMerica Corporation in the long-term care market.
Now what:PharMerica manages pharmacy programs for 15% of the country's nursing homes, and with aging and longer-living baby boomers in the mix, it's not unreasonable to believe that demand for PharMerica Corporation's services will grow, rather than shrink, in the coming years.
If a sale happens, PharMerica Corporation will add $519 million and $0.47 in quarterly revenue and earnings per share, respectively, to the buyer. It's too soon to say whether this rumor has teeth (and investors shouldn't buy stocks on rumors anyway), but I wouldn't be shocked if PharMerica Corporation gets some tire kickers. Given the market opportunity in this patient population and the fact that CVS Health paid 1.7 times annualized quarterly sales, ex-debt, to buy Omnicare, a bid for the company could come in higher than this company is currently trading.
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Todd Campbell has no position in any stocks mentioned.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.Like this article? Follow him onTwitter where he goes by the handle@ebcapitalto see more articles like this.The Motley Fool recommends CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.