PharMerica Inc., a pharmacy services company being purchased by drug wholesaler Bergen Brunswig Corp., said fourth-quarter profit fell 23% as it restructured to deal with Medicare changes.
PharMerica, based in Tampa, Fla., said net income fell to $5.82 million, or 7 cents a share, from $7.56 million, or 9 cents, a year earlier. It was expected to earn 5 cents, the average estimate of six analysts surveyed by First Call Corp. Revenue rose 17% to $293.8 million.
PharMerica, which was formed in December 1997 in a merger, is to be purchased by Orange-based Bergen Brunswig for $1.24 billion in stock and debt. PharMerica, the second-largest provider of pharmacy products and services to hospitals and nursing homes, said it started cutting costs in the third quarter as it prepared for its customers' transition to a fixed reimbursement system for Medicare, the federal health insurance plan for the elderly.
Bergen Brunswig and PharMerica shareholders will vote on the transaction April 22. The purchase calls for Bergen Brunswig to issue 25 million new shares, exchanging 0.275 of a share for every PharMerica share. It will also assume $580 million in PharMerica debt.
Last week, before the closing date of the transaction was announced, the spread between PharMerica's share price and Bergen Brunswig's grew, suggesting investors weren't confident the purchase would be completed. Since the announcement, shares have traded closer to the 0.275 ratio called for in the transaction.
"Coming out of the third quarter, there was still a level of concern that there was another shoe waiting to fall," said David Redmond, PharMerica's chief financial officer.
PharMerica's stock rose 50 cents to $6.63 a share. Bergen's shares rose 63 cents to $26.88.