Magellan Health Services Inc. (MGLN) inked a deal to acquire Partners Rx for $100 million. The acquisition is expected to culminate in the final quarter of 2013, pending closing conditions along with expiration of the Hart-Scott-Rodino Antitrust Act waiting period.
Magellan Health intends to fund the acquisition from its available cash. Strong cash balance well supports its acquisitions. Additionally, some of the principal owners of Partners Rx will buy $10 million of Magellan Health’s restricted common stock.
Headquartered in Scottsdale, AZ, and founded in 2001, Partners Rx is a full-service commercial pharmacy benefits management company (PBM), covering more than 0.3 million core commercial PBM lives. Partners Rx sells its health plans primarily through third party administrators (TPAs), consultants and brokers.
As part of its growth strategies, Magellan Health undertakes acquisitions that complement its operations, and contributes toward strengthening its presence in the pharmacy marketplace. The acquisition, thus, is a strategic fit for the company, augmenting its full-service PBM capabilities. Partners Rx is expected to generate $240 million in revenue in 2013, adding to Magellan Health’s top line that has been exhibiting solid growth.
Following the acquisition, Partners Rx will be a part of Magellan Pharmacy Solutions.
This acquisition comes after a long gap. Earlier in 2009, Magellan Health acquired First Health Services Corporation (‘‘FHS’’), FHC, Inc. (‘‘FHC’’) and Provider Synergies, LLC for a total cash consideration of $114.5 million. All these entities are direct and indirect subsidiaries of Coventry.
Acquisitions have helped Magellan Health widen its portfolio. Via the inorganic route, the company expanded into radiology benefits management and specialty pharmaceutical management in 2006, and into Medicaid administration in 2009.
Among others in the same space, recently WellCare Health Plans, Inc. (WCG) announced its plans to acquire Windsor Health Group Inc. from German insurer Munich Re AG. for an undisclosed amount. In July, Humana Inc. (HUM) entered into an agreement to acquire American Eldercare Inc. for an undisclosed amount. Earlier, in May, Aetna Inc. (AET) closed the acquisition of Coventry Health Care, Inc.
Magellan Health carries a Zacks Rank #3 (Hold).