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Omnicare Launches Tender Offer

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PharMerica Corporation (PMC - Free Report) , a pharmacy management services company, recently revealed that Omnicare Inc. , 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 - Free 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 The previous offer was originally made privately on July 19, 2011, and then publicized by Omnicare on August 23, 2011.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 - Free 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.

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