Microeconomics > Medco Accredo Merger

On Wednesday, February 23, Medco (NYSE: MHS) announced they where acquiring Accredo Health (NASD: ACDO). This acquisition is valued at $2.2 billion. The deal is expected to close in mid 2005 after an approval by the shareholders of Accredo and some other customary closing conditions.

This acquisition makes a lot of sense. Medco is a huge pharmacy benefits manager and buying a specialty retail pharmacy service firm will allow it to become the nations largest pharmacy service. This new combined company should generate more then $4billion in annual revenue. This deal will also be accretive to Medco’s 2006 earnings and save the company money because of synergies between the two companies.

The specific terms of the deal state that each Accredo share will be exchanged for 22.00 in cash and .049107 shares of Medco stock. The equity portion of the deal is expected to be tax-free for Accredo shareholders. Medco is funding this transaction through current cash, loans and financing its accounts receivable.

For the Fiscal year ending 2005, Medco has net revenue of $35 billion and earning of $1.75 billion. Accredo had revenues of $1.71 billion and earning of $155 million.

The common stock of Accredo (ACDO) rose 39.3%, up $11.87 after the deal was announced closing at $42.11 per share. Medco traded down .67%, down $.29 to close at $43.14 per share. The deal financials represents a premium of 43% based ACDO’s Tuesday closing price.

 

 

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