UPDATE: SXC Health (SXCI) to Acquire Catalyst Heath (CHSI) in $4.4B Cash and Stock Deal

April 18, 2012 6:22 AM EDT
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(Updated - April 18, 2012 6:23 AM EDT)

SXC Health Solutions Corp. (Nasdaq: SXCI) and Catalyst Health Solutions, Inc. (Nasdaq: CHSI) 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 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.

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.

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.

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.

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