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July 21, 2011 6:16 PM

Skadden and S&C Take Lead as Express Scripts Offers $29B for Medco

Posted by Tom Huddleston Jr.

St. Louis-based Express Scripts, Inc., plans to buy rival Medco Health Solutions, Inc., in a $29.1 billion deal that would create the country's largest pharmacy-benefit manager, the companies announced Thursday.

The deal is the second megadeal announced in a week. On Friday, BHP Billiton announced a $12.1 billion bid for oil and gas company Petrohawk Energy. Both transactions follow reports that the pace of M&A slowed during the second quarter of 2011 following a prodigious start to the year, suggesting that the market's continued appetite for large deals has not yet been sated.

Express Scripts and Medco manage the prescription drug benefits plans that businesses offer their employees. Under the terms of the agreement, St. Louis-based Express Scripts would pay about $71.36 for each share of Franklin Lakes, NJ-based Medco in cash and stock. Medco shareholders would receive $28.80 in cash and 0.81 Express Scripts shares for each Medco share upon closing of the deal--which is expected in the first half of 2012 should it win the necessary shareholder and regulatory approvals.

By joining forces, the companies would create the country's largest pharmacy-benefit manager with more than $110 billion in combined 2010 sales, according to Bloomberg. The transaction is expected to face regulatory scrutiny, though Express Scripts CEO George Paz expressed confidence in the deal's ability to gain approval.

Skadden, Arps, Slate, Meagher & Flom is representing Express Scripts with an M&A team that includes partners Lou Kling, Howard Ellin, and Kenneth Wolff. Antitrust partner Clifford Aronson is advising on regulatory aspects.

Express Scripts has often turned to Skadden in the past for large deals, including the company's ultimately unsuccessful $26 billion bid for Caremark Rx in 2006. In 2009 the firm led the way on Express Scripts's $4.7 billion acquisition of Net Rx from WellPoint Inc.

Medco, meanwhile, has turned to Sullivan & Cromwell corporate partners James Morphy and Matthew Hurd to advise on the transaction. Joining them are benefits partner Matthew Friestedt, finance partner Neal McKnight, and tax partner Ron Creamer.

Dechert partner Mike Cowie and competition cochair Paul Denis are serving as antitrust counsel to Medco.

Thomas Moriarty is general counsel for Medco, while Express Scripts general counsel Keith Ebling is heading up his company's in-house legal team.

Citigroup Global and Credit Suisse, which arranged $14 billion in committed financing to Express Scripts, are being advised by Cravath, Swaine & Moore. Gibson, Dunn & Crutcher is also advising Citigroup in relation to the proposed transaction. Dewey & LeBoeuf is also representing Credit Suisse.

Lazard Ltd, a financial adviser to Medco on the transaction, is being advised by Wachtell, Lipton, Rosen & Katz.

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