Notable Mergers and Acquisitions of the Day 6/5: RTP/ACH/BHP, MGLN, IMA

June 5, 2009 9:31 AM EDT

• Shares of Rio Tinto plc (NYSE: RTP) are higher after the mining company terminated its deal with Aluminium Corporation of China (NYSE: ACH), in favor of a share sale and iron ore venture with BHP Billiton (NYSE: BHP).
  
  Rio Tinto said it planned to raise $15.2 billion by selling new stock to its shareholders in a rights issue, which will remove its net debt to $23.2 billion.
  
  Rio Tinto turned to former suitor BHP Billiton, signing a non-binding agreement to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets. The joint venture will encompass all current and future Western Australian iron ore assets and liabilities and will be owned 50:50 by BHP Billiton and Rio Tinto.
  
  
• Magellan Health Services, Inc. (Nasdaq: MGLN) today announced that it has signed a definitive agreement to acquire First Health Services Corporation, a subsidiary of Coventry Health Care, Inc. (NYSE: CVH) that provides pharmacy benefits administration and other services for Medicaid programs. The Company also signed service agreements with Coventry to manage radiology services on a risk basis and to provide oncology management services in five Coventry markets each.
  
  Based in Glen Allen, Va., First Health Services Corporation provides pharmacy benefits administration, health care management, and IT services to state Medicaid programs.
  
  Under the terms of the purchase agreement, Magellan will pay Coventry $110 million in cash for the stock of First Health Services as well as certain other assets related to the operation of the First Health Services business. The transaction is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the third quarter of 2009. The Company will fund the acquisition with cash on hand. First Health Services will become a wholly owned subsidiary of Magellan.
  
  Assuming the transaction closes July 31, 2009, for the five months of 2009 post acquisition, the Company expects First Health Services to generate revenue of approximately $60 million and segment profit of $7.5 million. The Company expects the transaction to be accretive to earnings by $0.05 per share in 2009.
  
  In addition to the definitive agreement for the purchase of First Health Services, Magellan has entered into three-year agreements with Coventry to manage radiology services on a risk basis and provide the Company's new oncology management services. Both parties have agreed that the acquisition of First Health Services and the service agreements are each contingent upon the completion of the other, in order to ensure that incentives for the completion of the transactions are aligned.
  
  Under the radiology agreement, Magellan will manage advanced diagnostic imaging services, including cardiac diagnostic testing, in five Coventry markets, with a planned implementation of two markets in the fourth quarter of 2009 and three markets in early 2010. Annual revenue upon full implementation of the contract is expected to be $150 million.
  
  Assuming implementation begins early in the fourth quarter of 2009, the Company expects 2009 revenues from the radiology contract to be approximately $20 million, with no significant contribution to segment profit as a result of one-time implementation and start-up costs.
  
  The oncology service agreement is expected to be implemented in five Coventry markets in the fourth quarter of 2009. Magellan's oncology management program addresses the selection, cost and quality of pharmaceutical agents used to treat cancer, provides clinical care management services, and improves administrative processes, such as the accuracy of claims payments.
  
  
• Inverness Medical Innovations (NYSE: IMA) and Concateno plc today announced that they have reached agreement on a proposal for Inverness to acquire all of Concateno's outstanding share capital. Concateno, located in London, England, is a leading European supplier of drugs of abuse testing products and services with 2008 revenues of approximately 47.5 million pounds Sterling (or approximately $76 million). Concateno is quoted on the AIM market of the London Stock Exchange.
  
  The acquisition is expected to be implemented by way of a court-approved scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006. The scheme of arrangement is subject to approval by the shareholders of Concateno and sanction of the High Court of Justice in England and Wales as well as other customary conditions. If approved the acquisition would be expected to become effective during the third quarter of 2009.
  
  Under the proposed terms of the acquisition, each holder of Concateno shares will receive, for each Concateno share, 79 pence in cash and 0.02 shares of Inverness' common stock, based on Inverness' closing price per common share on the New York Stock Exchange on June 4, 2009 of $34.00 and applying an exchange rate of 1.00 pound:$1.61, for a total implied value per Concateno share of 121.24 pence. Based on information supplied by Concateno, there are approximately 103.2 million Concateno shares currently issued and outstanding after consideration of certain shares which will be repurchased by Concateno for nominal consideration and cancelled as a result of the transaction.

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