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April 18, 2012 4:44 PM

Sidley, Milbank Lead on SXC's $4.4 Billion Catalyst Buy

Posted by Tom Huddleston Jr.

Pharmacy-benefits manager SXC Health Solutions has agreed to pay $4.4 billion to acquire rival Catalyst Health Solutions, in a deal that means more consolidation in the health care industry.

Lisle, Illinois–based SXC said Wednesday that it will pay $28 in cash and 0.6606 shares of its own stock in exchange for each Catalyst share. The purchase price represents a 28 percent premium over Catalyst's Tuesday closing price. The companies, both of which work with pharmacies and employers to manage prescription drug benefits plans, expect the deal to result in roughly $125 million in annual savings in each of the first two years after closing.

SXC's announcement that it plans to buy Catalyst comes on the heels of the Federal Trade Commission giving its blessing to Express Scripts' $29.1 billion acquisition of Medco Health Solutions following an eight-month regulatory review. With combined 2010 sales of more than $110 billion, the entity created by that deal will be the industry leader in the pharmacy-benefit management market.

The SXC–Catalyst transaction—which, like the Express Scripts–Medco deal, is subject to antitrust approval—would create a company expected to have more than $13 billion in annual revenue. The companies expect the deal to close in the second half of this year.

SXC is being advised on the matter by Sidley Austin, which has represented the company on such past matters as its 2008 acquisition of National Medical Health Card Systems and its 2010 purchase of MedfusionRx. Cliff Berman is SXC's general counsel.

Sidley's corporate team is led by partners Gary Gerstman and Scott Williams. Tax partner Sharp Sorensen, benefits partner Matthew Johnson, health care partner Mark Langdon, finance partner Tracey Nicastro are also working on the deal. Partners Marc Raven and David Giardina are serving as antitrust counsel.

Heenan Blaikie M&A partners Kevin Rooney, Stephanie Sykes, and Charles MacCready are serving as Canadian counsel to SXC, which was founded in Canada and still maintains some operations there.

Milbank, Tweed, Hadley & McCloy, meanwhile, is representing Rockville, Maryland–based Catalyst in connection with the deal, with a corporate team led by partner Thomas Janson and of counsel David Schwartz. Litigation partner Alan Stone, litigation of counsel Charles Westland, tax partner Russell Kestenbaum, compensation and benefits partner Paul Wessel, intellectual property partner Lawrence Kass, environmental of counsel Matthew Ahrens, and leveraged finance partner Richard Gray are also advising.

Benjamin Preston is Catalyst's general counsel.

Stikeman Elliott is serving as Canadian counsel to Catalyst in connection with the deal, according to the firm. Stikeman's team includes corporate partners Donald Belovich and Simon Romano, along with tax partner Dean Kraus and competition partner Jeffrey Brown.

Fried, Frank, Harris, Shriver & Jacobson corporate partner Philip Richter is representing Goldman Sachs in its role as lead financial adviser to Catalyst.

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