ST. LOUIS and FRANKLIN LAKES, N.J., July 21, 2011 /PRNewswire/ -- Express Scripts,
Inc. (NASDAQ: ESRX) and Medco Health Solutions, Inc. (NYSE: MHS)
today announced that they have entered into a definitive merger
agreement. Under the agreement, Medco shareholders will
receive $71.36 per share in cash and
stock, or $29.1 billion, based on
yesterday's closing price. Medco shareholders will receive
$28.80 in cash and 0.81 shares for
each Medco share they own upon closing of the transaction.
The agreement has been unanimously approved by the boards of
directors of both companies.
The merger will combine the expertise of two complementary
pharmacy benefit managers (PBMs) to accelerate efforts to lower the
cost of prescription drugs and improve the quality of care for
Americans.
"The cost and quality of healthcare is a great concern to all
Americans; this is the right deal at the right time for the right
reasons," said George Paz, chairman
and CEO of Express Scripts. "Companies like ours have a
responsibility to provide the leadership and resources required to
drive out waste in healthcare and provide the best care in the
world. The merger with Medco will accelerate our efforts to
create greater efficiencies in the healthcare system and better
protect American families from the rising costs of prescription
medicine while improving health outcomes.
"This continues Express Scripts' commitment to strong growth,
both organically and through strategic mergers and acquisitions.
The opportunity with Medco represents an attractive strategic
combination which will provide the opportunity to move forward with
a wide array of tools and resources to accomplish our goals."
David Snow, chairman and CEO of
Medco, commented: "Our organizations represent two great
success stories in American business. We have each been
successful in creating shareholder value because we are both
passionate about driving value to our customers through service,
innovation and a focus on cost and quality. We have a shared desire
to improve the way healthcare is delivered in this country and I
believe this creates a strong best-of-breed foundation, culturally,
for a very successful merger.
"We continue to have great confidence in moving forward as a
stand-alone business, however, the incremental benefits of
combining with Express Scripts are both logical and
compelling."
Driving Out Pharmacy-Related Waste Creates Value for the
Nation's Employers, Health Plans, Unions and Government
Agencies
Express Scripts and Medco believe the transaction will deliver
value to clients and their members, shareholders, and other
stakeholders by:
- Generating greater cost savings for patients and plan
sponsors
- Creating more efficiency in the supply chain
- Closing gaps in care and achieving greater adherence through
our combined behavioral and clinical approach
- Utilizing our collective expertise to better manage the cost
and care associated with specialty medications
- Optimizing our ability to respond to an increasingly complex
Medicare and Medicaid environment
- Enhancing mail pharmacy technology to optimize patient care and
satisfaction
- Accelerating the research, development and deployment of trend
management solutions to address inefficiencies in the
marketplace
- Continuing to advance evidence-based and safety solutions for
innovative pharmaceuticals and biosimilars
- Advancing our efforts against fraud, waste and abuse
- Attracting other leading healthcare entities to collaborate on
next-generation solutions
Continuing a Legacy of Consumer Advocacy
Express Scripts has a history of serving American families and
providing affordable benefits to businesses in a globally
competitive marketplace to lower the cost of medications and to
ensure their safety and accessibility. For example, by 2014,
spending for specialty medicines for diseases such as cancer,
multiple sclerosis and hepatitis is estimated to comprise 40% of
U.S. drug spend. By combining each organization's innovative
specialty patient care programs, Express Scripts will be well
positioned to meet the challenges in this critical area of
healthcare.
The pharmaceutical landscape is dynamic and complex. Change is
constant and challenges remain in product safety, efficacy,
distribution channels and the overall economics. Consumer advocacy
is required. The combined company will be well equipped to create
more efficiency in the supply chain to better serve employers and
the American families that utilize their pharmacy benefit.
Market Dynamics / Competition
Express Scripts and Medco believe they will be successful
working through the regulatory review process. Competition in the
pharmacy benefit management (PBM) business is intense.
Competition comes from several sources, including retail
pharmacy PBMs, managed care PBMs, independent PBMs and specialized
PBMs. The PBM business will continue to remain competitive
after this transaction, as PBMs will continually drive for greater
efficiencies to provide better service and pricing to their
customers.
Terms of the Transaction
Under the terms of the agreement, Express Scripts shall form a
new holding company called Express Scripts Holding Company.
Medco shareholders will receive $28.80 in cash and 0.81 shares of Express Scripts
Holding Company for each Medco share they own upon closing of the
transaction, and Express Scripts shareholders will become
shareholders of Express Scripts Holding Company receiving one share
of the new holding company for each share of Express Scripts that
they own upon closing. Based on the closing price of Express
Scripts stock of $52.54 as of
July 20, 2011, the stock component is
valued at $42.56 per share, which,
when combined with the $28.80 in cash
brings the total value per share to Medco shareholders of
$71.36. This represents a premium to
Medco shareholders of 28 percent over Medco's closing share price
on July 20, 2011. Upon closing
of the transaction, Express Scripts shareholders are expected to
own approximately 59 percent of the combined company and Medco
shareholders are expected to own approximately 41 percent.
The transaction provides certain value to Medco shareholders
through the cash component, as well as continued participation in
the future prospects expected to result from the combination
through their ownership of approximately 41 percent of Express
Scripts Holding Company shares.
The merger is subject to regulatory clearance and Express
Scripts' and Medco's shareholder approvals and other customary
closing conditions. The terms of the merger agreement provide
for the payment of termination fees in certain circumstances, but
not in connection with the failure to obtain regulatory clearance.
The transaction is expected to close in the first half of 2012.
The corporate headquarters will be in St. Louis and George Paz will serve as
chairman and CEO of the combined organization. The Board of
Directors will be expanded to include two current independent Medco
board members.
The new company will draw upon the collective talent at both
companies. The combination of Express Scripts and Medco will create
a best-of-breed enterprise that will harness the experience and
expertise of each organization to ensure that customers and
patients benefit fully from their complementary capabilities to
lower the total cost of healthcare, drive quality outcomes and
accelerate the delivery of advanced healthcare solutions.
Financial Considerations
Due diligence to date has identified estimated synergies of
$1 billion once fully integrated, which represents
approximately 1% of the combined company's costs. The transaction
is expected to be slightly accretive to EPS (excluding integration
and deal-related costs and charges) in the first full year after
closing and moderately accretive once fully integrated.
Advisors
Express Scripts' financial advisors are Credit Suisse and
Citigroup Global Markets, Inc. Its legal advisor is Skadden,
Arps, Slate, Meagher & Flom, LLP. Medco's co-lead financial
advisors are J.P. Morgan and Lazard, its legal advisor is Sullivan
& Cromwell LLP and its regulatory counsel is Dechert LLP.
Conference Call/Webcast
Express Scripts and Medco will be conducting an analyst and
investor conference call/webcast Thursday,
July 21, 2011, at 8:30 a.m.
EDT to discuss the proposed combination. The webcast and
slides can be accessed on the investor relations sections of the
two companies' websites, www.express-scripts.com and
www.medcohealth.com. Participants can also listen to the conference
call by dialing either 866-882-2544 in the United States or 973-638-3205 outside of
the United States. The access code
is 84888352.
A replay of the conference call will be available from
11:30 a.m. EDT, Thursday, July 21 through Thursday, August 4 and can be accessed by dialing
855-859-2056. International callers can access the replay by
dialing 404-537-3406. The replay will also be available at
the Express Scripts website, www.express-scripts.com.
For more information visit the transaction website:
www.betterRxcare.com
About Express Scripts
Express Scripts, one of the largest pharmacy benefit management
companies in North America, is
leading the way toward creating better health and value for
patients through Consumerology®, the advanced application of the
behavioral sciences to healthcare. This approach is helping
millions of members realize greater healthcare outcomes and
lowering cost by assisting in influencing their behavior.
Headquartered in St. Louis,
Express Scripts provides integrated PBM services including
network-pharmacy claims processing, home delivery services,
specialty benefit management, benefit-design consultation,
drug-utilization review, formulary management, and medical and drug
data analysis services. The company also distributes a full range
of biopharmaceutical products and provides extensive
cost-management and patient-care services. More information can be
found at www.express-scripts.com and www.consumerology.com.
About Medco Health Solutions
Medco Health Solutions (NYSE: MHS) is pioneering the world's
most advanced pharmacy® and its clinical research and
innovations are part of Medco making medicine smarter™ for
more than 65 million members.
With more than 20,000 employees dedicated to improving patient
health and reducing costs for a wide range of public and private
sector clients, and 2010 revenues of $66
billion, Medco ranks 34th on the Fortune 500 list and
is named among the world's most innovative, most admired and most
trustworthy companies.
For more information, go to www.medcohealth.com.
EXPRESS SCRIPTS FORWARD LOOKING STATEMENTS
Cautionary Note Regarding Forward-Looking Statements
This material may include forward-looking statements, both with
respect to us and our industry, that reflect our current views with
respect to future events and financial performance. Statements that
include the words "expect," "intend," "plan," "believe," "project,"
"anticipate," "will," "may," "would" and similar statements of a
future or forward-looking nature may be used to identify
forward-looking statements. All forward-looking statements address
matters that involve risks and uncertainties, many of which are
beyond our control. Accordingly, there are or will be important
factors that could cause actual results to differ materially from
those indicated in such statements and, therefore, you should not
place undue reliance on any such statements. We believe that
these factors include, but are not limited to, the following:
STANDARD OPERATING FACTORS
- Our ability to remain profitable in a very competitive
marketplace is dependent upon our ability to attract and retain
clients while maintaining our margins, to differentiate our
products and services from others in the marketplace, and to
develop and cross sell new products and services to our existing
clients;
- Our failure to anticipate and appropriately adapt to changes in
the rapidly changing health care industry;
- Changes in applicable laws or regulations, or their
interpretation or enforcement, or the enactment of new laws or
regulations, which apply to our business practices (past, present
or future) or require us to spend significant resources in order to
comply;
- Changes to the healthcare industry designed to manage
healthcare costs or alter healthcare financing practices;
- Changes relating to our participation in Medicare Part D, the
loss of Medicare Part D eligible members, or our failure to
otherwise execute on our strategies related to Medicare Part
D;
- A failure in the security or stability of our technology
infrastructure, or the infrastructure of one or more of our key
vendors, or a significant failure or disruption in service within
our operations or the operations of such vendors;
- Our failure to effectively execute on strategic transactions,
or to integrate or achieve anticipated benefits from any acquired
businesses;
- The termination, or an unfavorable modification, of our
relationship with one or more key pharmacy providers, or
significant changes within the pharmacy provider marketplace;
- The termination, or an unfavorable modification, of our
relationship with one or more key pharmaceutical manufacturers, or
the significant reduction in payments made or discounts provided by
pharmaceutical manufacturers;
- Changes in industry pricing benchmarks;
- Results in pending and future litigation or other proceedings
which would subject us to significant monetary damages or penalties
and/or require us to change our business practices, or the costs
incurred in connection with such proceedings;
- Our failure to execute on, or other issues arising under,
certain key client contracts;
- The impact of our debt service obligations on the availability
of funds for other business purposes, and the terms and our
required compliance with covenants relating to our indebtedness;
our failure to attract and retain talented employees, or to manage
succession and retention for our Chief Executive Officer or other
key executives;
TRANSACTION-RELATED FACTORS
- Uncertainty as to whether Express Scripts, Inc. (Express
Scripts) will be able to consummate the transaction with Medco
Health Solutions, Inc. (Medco) on the terms set forth in the merger
agreement;
- The ability to obtain governmental approvals of the transaction
with Medco;
- Uncertainty as to the actual value of total consideration to be
paid in the transaction with Medco;
- Failure to realize the anticipated benefits of the transaction,
including as a result of a delay in completing the transaction or a
delay or difficulty in integrating the businesses of Express
Scripts and Medco;
- Uncertainty as to the long-term value of Express Scripts
Holding Company (currently known as Aristotle Holding, Inc.) common
shares;
- Limitation on the ability of Express Scripts and Express
Scripts Holding Company to incur new debt in connection with the
transaction;
- The expected amount and timing of cost savings and operating
synergies; and
- Failure to receive the approval of the stockholders of either
Express Scripts or Medco for the transaction.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere,
including the risk factors included in Express Scripts' most recent
reports on Form 10-K and Form 10-Q and the risk factors included in
Medco's most recent reports on Form 10-K and Form 10-Q and other
documents of Express Scripts, Express Scripts Holding Company and
Medco on file with the Securities and Exchange Commission ("SEC").
Any forward-looking statements made in this material are qualified
in their entirety by these cautionary statements, and there can be
no assurance that the actual results or developments anticipated by
us will be realized or, even if substantially realized, that they
will have the expected consequences to, or effects on, us or our
business or operations. Except to the extent required by applicable
law, we undertake no obligation to update publicly or revise any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
MEDCO FORWARD-LOOKING STATEMENT
This press release contains forward-looking statements,
including, but not limited to, statements related to Medco's plans,
objectives, expectations (financial and otherwise) or intentions.
Actual results may differ significantly from those projected or
suggested in any forward-looking statements. Factors that may
impact these forward-looking statements include but are not limited
to:
- Competition in the PBM, specialty pharmacy and broader
healthcare industry is intense and could impair our ability to
attract and retain clients.
- Failure to retain key clients and their members, either as a
result of economic conditions, increased competition or other
factors, could result in significantly decreased revenues, harm to
our reputation and decreased profitability;
- Government efforts to reduce healthcare costs and alter
healthcare financing practices could lead to a decreased demand for
our services or to reduced profitability;
- Failure in continued execution of our retiree strategy,
including the potential loss of Medicare Part D-eligible members,
could adversely impact our business and financial results;
- If we or our suppliers fail to comply with complex and
evolving laws and regulations domestically and internationally, we
could suffer penalties, be required to pay substantial damages
and/or make significant changes to our operations;
- If we do not continue to earn and retain purchase discounts,
rebates and service fees from manufacturers at current levels, our
gross margins may decline;
- From time to time we engage in transactions to acquire other
companies or businesses and if we are unable to effectively
integrate acquired businesses into ours, our operating results may
be adversely affected. Even if we are successful, the integration
of these businesses has required, and will likely continue to
require, significant resources and management attention;
- New legislative or regulatory initiatives that restrict or
prohibit the PBM industry's ability to use patient identifiable
information could limit our ability to use information critical to
the operation of our business;
- Our Specialty Pharmacy business is dependent on our
relationships with a limited number of suppliers and our clinical
research services are dependent on our relationships with a limited
number of clients. As such, the loss of one or more of these
relationships, or limitations on our ability to provide services to
these suppliers or clients, could significantly impact our ability
to sustain and/or improve our financial performance;
- Our ability to grow our Specialty Pharmacy business could be
limited if we do not expand our existing base of drugs or if we
lose patients;
- Our Specialty Pharmacy business, certain revenues from
diabetes testing supplies and our Medicare Part D offerings
expose us to increased billing, cash application and credit risks.
Additionally, current economic conditions may expose us to
increased credit risk;
- Changes in reimbursement, including reimbursement for
durable medical equipment, could negatively affect our revenues and
profits;
- Prescription volumes may decline, and our net revenues and
profitability may be negatively impacted, if the safety risk
profiles of drugs increase or if drugs are withdrawn from the
market, including as a result of manufacturing issues, or if
prescription drugs transition to over-the-counter
products;
- Demand for our clinical research services depends on the
willingness of companies in the pharmaceutical and biotechnology
industries to continue to outsource clinical development and on our
reputation for independent, high-quality scientific research and
evidence development;
- PBMs could be subject to claims under ERISA if they are
found to be a fiduciary of a health benefit plan governed by
ERISA;
- Pending litigation could adversely impact our business
practices and have a material adverse effect on our business,
financial condition, liquidity and operating results;
- Changes in industry pricing benchmarks could adversely
affect our financial performance;
- We are subject to a corporate integrity agreement and
noncompliance may impede our ability to conduct business with the
federal government;
- The terms and covenants relating to our existing
indebtedness could adversely impact our financial performance and
liquidity;
- We may be subject to liability claims for damages and other
expenses not covered by insurance;
- The success of our business depends on maintaining a
well-secured pharmacy operation and technology infrastructure.
Additionally, significant disruptions to our infrastructure or any
of our facilities due to failure to execute security measures or
failure to execute business continuity plans in the event of an
epidemic or pandemic or some other catastrophic event could
adversely impact our business;
- Business process and technology infrastructure improvements
associated with our agile enterprise initiative may not be
successfully or timely implemented or may fail to operate as
designed and intended, causing the Company's performance to
suffer;
- We may be required to record a material non-cash charge to
income if our recorded intangible assets or goodwill are impaired,
or if we shorten intangible asset useful lives;
- We are subject to certain risks associated with our
international operations; and
- Anti-takeover provisions of the Delaware General Corporation
Law, our certificate of incorporation and our bylaws could delay or
deter a change in control and make it more difficult to remove
incumbent officers and directors.
- Express Scripts and Medco may be unable to obtain
stockholder or regulatory approvals required for the merger or may
be required to accept conditions that could reduce the anticipated
benefits of the merger as a condition to obtaining regulatory
approvals;
- The length of time necessary to consummate the proposed
merger may be longer than anticipated; problems may arise in
successfully integrating the businesses of Express Scripts and
Medco;
- The proposed merger may involve unexpected costs;
- The businesses may suffer as a result of uncertainty
surrounding the proposed merger; and
- The industry may be subject to future risks that are
described in SEC reports filed by Express Scripts and
Medco.
The foregoing list of factors is not exhaustive. You should
carefully consider the foregoing factors and the other risks and
uncertainties that affect our business described in our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and other
documents filed from time to time with the Securities and Exchange
Commission.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is not a solicitation of a proxy from any
stockholder of Express Scripts, Medco or Express Scripts Holding
Company In connection with the Agreement and Plan of Merger among
Medco, Express Scripts, Express Scripts Holding Company, Plato
Merger Sub Inc. and Express Scripts Merger Sub, Inc. (the
"Merger"), Medco, Express Scripts and Express Scripts Holding
Company, intend to file relevant materials with the SEC, including
a Registration Statement on Form S-4 filed by Express Scripts
Holding Company, that will contain a joint proxy
statement/prospectus. INVESTORS AND SECURITY HOLDERS ARE
URGED TO READ THESE MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MEDCO, EXPRESS
SCRIPTS, EXPRESS SCRIPTS HOLDING COMPANY. AND THE MERGER. The
Form S-4, including the joint proxy statement/prospectus, and other
relevant materials (when they become available), and any other
documents filed by Express Scripts, Express Scripts Holding Company
or Medco with the SEC, may be obtained free of charge at the SEC's
web site at www.sec.gov. In addition, investors and security
holders may obtain free copies of the documents filed with the SEC
by directing a written request to:
Mackenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
PARTICIPANTS IN THE SOLICITATION
Express Scripts, Express Scripts Holding Company and Medco and
their respective executive officers and directors may be deemed to
be participants in the solicitation of proxies from the security
holders of either Express Scripts and Medco in connection with the
Merger. Information about Express Scripts' directors and
executive officers is available in Express Scripts' definitive
proxy statement, dated March 21,
2011, for its 2011 annual general meeting of stockholders.
Information about Medco's directors and executive officers is
available in Medco's definitive proxy statement, dated April 8, 2011, for its 2011 annual general
meeting of stockholders. Other information regarding the
participants and description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the Form S-4 and the joint proxy statement/prospectus regarding the
Merger that Express Scripts Holding Company, will file with the SEC
when it becomes available.
SOURCE Express Scripts, Inc.; Medco Health Solutions, Inc.