CVS to expand with US$10.1B Omnicare takeover

• Drugstore operator CVS Health Corp. said Thursday it will spend US$10.1 billion to buy Omnicare Inc., a company that supplies prescription medicines to nursing, assisted living and other health-care facilities.

The move gives CVS, the second-largest U.S. drugstore operator, access to the older, sicker U.S. population and builds on its specialty pharmacy, which provides drugs to people with expensive chronic conditions.

CVS said it expects the deal to add about US20 cents to adjusted earnings per share in 2016. The deal also includes debt of about US$2.3 billion, the companies said.

The pharmaceuticals sector has been consolidating as companies look to beef up and bargain for lower prices from both drug manufacturers and the three largest U.S. drug distributors.

“There’s a lot of purchasing scale. There’s a lot more volume. They could renegotiate their supply contracts, given the volume,” said FBR analyst Steven Halper.

In addition to its drugstore chain and mail-order sales, CVS is the second-largest pharmacy benefit manager in the United States, securing pricing for big employers and government plans.

CVS offered US$98 per Omnicare share, representing a premium of four per cent to the closing price Wednesday of Omnicare, the top U.S. provider of pharmacy services to the elderly.

Speculation has mounted of more pharmacy-industry consolidation as others have tied up, and the field of companies involved in drug distribution, sales or management has shrunk.

Health insurer United Health Group Inc. agreed to buy Catamaran Corp. for about US$12.8 billion in March. Rite Aid Corp. bought pharmacy benefit manager EnvisionRx for about US$2 billion in February. Last year, pharmacy Walgreen tied up with European pharmacy and drug distribution company Boots Alliance.