Medco to Buy Accredo in $2.2-Billion Deal

Medco Health Solutions Inc., one of the nation’s biggest pharmacy benefits managers, said Wednesday that it would buy Accredo Health Inc., a distributor of specialty drugs and services, in a $2.2-billion cash and stock deal to create the nation’s largest specialty pharmacy business.

The companies expect to generate more than $4 billion in annual revenue from their combined specialty drug businesses.

“We now have a broader array of drugs and a full spectrum of services to offer our clients and greater distribution capabilities,” said Dave Snow, Medco chairman, president and chief executive.

He noted it had been just 18 months since Medco was spun off by pharmaceutical giant Merck & Co., which had acquired it in 1993.

Medco’s overall revenue was nearly $35.4 billion last year, Accredo had revenue of $1.7 billion.

Medco said it intended to manage Memphis, Tenn.-based Accredo as an independent business. Accredo Chairman and CEO David D. Stevens will serve as its CEO.

Medco, based in Franklin Lakes, N.J., had launched its own specialty pharmacy operations two years ago, and struck a 10-year alliance with Accredo early in 2004 to create a platform for all specialty drugs.

Accredo distributes drugs to treat hemophilia, immunodeficiency disorders, multiple sclerosis and other diseases through 36 branch locations or ships them from four centralized dispensing facilities to patients’ homes, doctors’ offices and hospitals.

Medco said the combined company should generate more than $40 million in cost savings or extra revenue in 2006.

Under terms of the agreement, each Accredo share would be exchanged for $22 in cash and 0.49107 share of Medco common stock, subject to possible adjustment based on the value of Medco’s common stock before the deal closes.

At Tuesday’s closing Medco price, that combination would value each Accredo share at $43.33, a 43% premium over Accredo’s closing price Tuesday of $30.24 on Nasdaq.

Accredo shares rose $11.87 to $42.11 on Wednesday. Medco shares fell 29 cents to $43.14 on the New York Stock Exchange.

The transaction has been unanimously approved by the boards of both companies, but is subject to approval by Accredo shareholders. The companies expect to close the deal in mid-2005.