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Walgreen to buy Option Care
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Walgreen to buy Option Care
by Tara Croft Posted 04:32 EST, 2, Jul 2007
Creating the fourth-largest provider of specialty pharmacy services in the U.S., drugstore giant Walgreen Co.
said Monday, July 2, it agreed to acquire specialty pharmacy and home infusion service company Option
Care Inc. for about $850 million in cash. The $19.50 per share deal includes the assumption of a small
amount of debt, Walgreen said.
Deerfield, Ill.-based Walgreen's home care business, Walgreens Home Care, operates 45 facilities in 18
states, and Walgreens Specialty Pharmacy operates six locations. The acquisition will create national access
to Walgreens specialty pharmacy and home infusion services for patients and payors seeing as Buffalo
Grove, Ill.-based Option Care provides home infusion services and other specialty care for more than 40,000
patients from more than 100 pharmacies in 34 states.
Shares in Option Care surged 25% after the deal was announced, closing Monday at $19.24. Walgreen
shares closed up slightly at $43.71.
"This acquisition clearly establishes us as a national player in specialty pharmacy and home infusion
services," said Walgreen CEO Jeffrey A. Rein in a statement. "Option Care offered the best opportunity for
strengthening our position as a full-service specialty pharmacy provider, especially in areas such as
hemophilia, immune deficiency and oncology. By blending its capabilities with our current operations, we'll be
able to provide patient care on a nationwide basis in the patient's home, at their physician's office or at one of
our infusion suites."
In a conference call Monday afternoon, Walgreen CFO William Rudolphsen said the company expects the
purchase to add slightly to earnings during the first year after the deal closes. He also said the company
anticipates pretax synergies of about $15 million in the first year. Walgreen expects the deal to close in a few
months.
Specialty pharmacy is one of the fastest-growing healthcare areas, forecast to soar to $1.7 trillion in 2030,
according to the Pharmaceutical Care Management Association, a Washington trade group. The specialty
area has spawned many deals in recent years. Monday's announced purchase brings Walgreen closer to
rivals Medco Health Solutions Inc. and CVS Caremark in that category. Medco gained heft in the area when
it completed its purchase of specialty pharmacy business Accredo Health Inc. in August 2005 for $2.6 billion.
And the $27 billion merger of Caremark Inc. and CVS Corp., completed in March, created another huge
specialty pharmacy business.
On the smaller side, in November drug wholesaler AmerisourceBergen Corp. purchased IgG of America
Inc., a specialty pharmacy and infusion services business, for $35 million. And in March 2006, HIV/AIDSfocused specialty pharmacy services company Allion Healthcare Inc. of Melville, N.Y., agreed to acquire
certain assets from Whittier Goodrich Pharmacy Inc., an HIV pharmacy in Los Angeles, for $20 million.
Monday's deal comes just two months after Walgreen bought Take Care Health Systems, an operator of instore health clinics. The company, too, has been increasing its size in specialty pharmacy through
acquisitions. Last summer, Walgreen bought Medmark Inc. of Pittsburgh. The company also bought
SeniorMed Pharmacy and, in 2005, Schraft's, which focuses on fertility medications and services. Terms of
those deals were not disclosed.
Andy Cowherd and Drew Quigley from Peter J. Solomon Co.were financial advisers to Walgreen in the
transaction, and Wachtell, Lipton, Rosen & Katz, led by Andrew R. Brownstein, Benjamin M. Roth and
Shlomit Wagman, was legal counsel. UBS Investment Bank was financial adviser to Option Care, and Bryan
Cave LLP, led by Donald Figliulo, was its legal counsel.
Willkie Farr & Gallagher LLP attorneys Richard Posen and Robert Langdon advised Peter J. Solomon.
Representatives for Walgreen and Option Care declined to comment beyond the press release and
conference call.
7/27/2007