In a bid to expand its home infusion business, BioScrip Inc. (BIOS) inked a definitive agreement to take over Ohio-based CarePoint Partners Holdings and its subsidiaries for cash payment of $223 million.
This lucrative acquisition is expected to leverage BioScrip’s top-line. It should also boost the company’s return on capital (ROC) going forward. Moreover, post integration (12-15 months), the acquisition is expected to improve the long-term growth prospects of the company.
For its latest acquisition, BioScrip envisages tax benefit of $45 million, yielding a net purchase price of $178 million. The acquisition is expected to close in the third quarter of 2013, subject to standard closing conditions.
CarePoint Partners is a provider of home and alternate-site infusion therapy for complex, acute and chronic illness across the U.S. It has 28 service sites in nine states, concentrated in the Gulf Coast and East Coast regions. As a leading national provider of infusion therapy to about 20,500 patients on an annual basis, CarePoint Partners expects to generate annual revenues of $160 million.
Following the acquisition, BioScrip will serve over 0.1 million patients across the U.S. with its home infusion services. The company also expects to improve standards of patient care. As per management, the deal will support BioScrip in achieving its growth targets in the long term.
BioScrip continues to expand its Infusion services business via inorganic means. Expected for closure later this year, the buyout will seamlessly strengthen the company’s foothold in the U.S.
On the tepid side, BioScrip failed to trim losses in the last quarter. Although the company’s Infusion services segment and Home Health segment is doing well, weakness in the PBM services segment remains an overhang.
Further, reimbursement cuts and adverse business mix leading to margin pressure continues to drag the financial results for BioScrip. Also worth mentioning is the tough competitive landscape with larger players and deeper resources.
The stock carries a Zacks Rank #4 (Sell). With optimism over the recently announced acquisition we expect analysts to pull estimates upward providing upward directional pressure on the Zacks Rank. Also, shares gained 5.3% to close at $15.79 on Monday.
While we avoid this medical sector stock at present, other stocks such as GNC Holdings Inc. (GNC), Herbalife Ltd. (HLF) and Rite Aid Corporation (RAD), carrying a Zacks Rank #2 (Buy) are expected to do well.
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