Back to top

Analyst Blog

PharMerica Corporation (PMC - Snapshot Report), a pharmacy management services company, recently revealed that Omnicare Inc. (OCR - Snapshot Report), which sells drugs to long-term care facilities and nursing homes, has launched a hostile tender offer to purchase its outstanding common stock for $15 per share on a cash basis. Deutsche Bank (DB - Analyst Report) is the financial adviser for PharMerica and Holland & Knight LLP, its legal adviser.  

Consequently, the Board of Directors of PharMerica will review this tender offer to arrive at a suitable action plan deemed to be in the best interests of the stakeholders. The company has requested its stockholders to avoid any action until the Board has reviewed the offer.

The Board of PharMerica will inform shareholders of its position with regard to the offer from Omnicare, within 10 official days, by providing its shareholders and filing with the U.S. Securities and Exchange Commission (“SEC”) a recommendation cum solicitation statement on Schedule 14D-9.

PharMerica observed that the current offer is similar to the earlier proposal from Omnicare, which was rejected by its Board. The previous offer was originally made privately on July 19, 2011, and then publicized by Omnicare on August 23, 2011.   

PharMerica reportedly runs about 94 pharmacies in 44 states and serves long-term care facilities, hospitals and nursing homes. It was formed by the spin-off, in July 2007, and amalgamation of the institutional pharmacy businesses of AmerisourceBergen Corporation (ABC - Analyst Report) and Kindred Healthcare Inc. into a stand-alone company.

Both PharMerica and Omnicare would stand to benefit from the deal as popular drugs, such as Plavix, Lipitor and others, are slated to lose patent protection. This will permit less expensive generic drugs to enter the market, which means larger margins for Omnicare and PharMerica.

Omnicare is a market leader in providing pharmaceutical care for the elderly. The industry is essential to serving the needs of the long-term care population. The company has reduced costs and increased efficiency through its Full Potential Plan.

However, the beneficial effects are partly offset by pressure from reimbursement cuts. Longer term, Omnicare will be able to offset some of these reimbursement cuts through better purchasing. Generics coming to market in the next few quarters present a substantial profitability opportunity due to Omnicare’s higher exposure to the institutional pharmacy channel than in past years.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%