Updated from 11:00 a.m. EDT
jumped 27% in Wednesday trading after
announced that its
subsidiary would acquire
, a subsidiary of Bergen Brunswig.
Bergen Brunswig, based in Orange County, Calif., will also provide ProCare with $2.5 billion of pharmaceuticals over the next five years. The sale will not include Stadtlander's corrections division, which provides pharmaceuticals to the prison inmate population.
Bergen Brunswig finished up 1 1/2, or 26%, at 7 5/16 in Wednesday regular trading. Meanwhile, CVS closed up 5/16, or 1%, at 39 11/16.
CVS paid $125 million in cash for the company, according to Todd Andrews, a spokesman for CVS.
Bergen Brunswig estimated that the total value of the transaction, including tax benefits and the estimated proceeds from a planned separate sale of Stadtlander's prison pharmaceutical division, would be about $285 million.
Tom Ryan, CVS chairman, president and chief executive, said in a statement that the deal would help move ProCare toward its goal of becoming the "largest, most integrated specialty pharmacy company in America."
Stadtlander, a full-service pharmacy based in Pittsburgh, Pa., provides prescriptions for patients with challenging and long-term health conditions including HIV/AIDS, organ transplants, cancer and multiple sclerosis. CVS ProCare focuses on providing prescriptions for similar health problems.
Meredith Adler, an analyst for
who has a strong buy rating on CVS, called the acquisition a positive move for the company, since it would "solidify" CVS' position as one of the few large companies that is addressing the market for customers with challenging and long-term health conditions. However, she said the purchase's impact would not be large, since it represents a "relatively small" portion of CVS' business. Lehman Brothers has done no underwriting for CVS.
CVS did not expect the acquisition to affect earnings this year, but predicted that it would add 2 cents a share to the company's 2001 earnings.
Credit Suisse First Boston
advised CVS on the deal, while Merrill Lynch advised Bergen Brunswig.
Bergen Brunswig said the deal would help reduce its debt and aid continuing operations through the end of fiscal 2001. The company also announced the sale of its
on June 26.
Andrews of CVS said he did not know whether CVS had actively pursued the purchase of Stadtlander, or if Bergen Brunswig approached CVS with an offer to sell the company. But he called the purchase a "natural fit for our growing business" in specialized pharmaceuticals. Andrews said specialty pharmacy is a $14.5 billion business annually for CVS, and is growing 20% a year.
Donna Dolan, a spokeswoman for Bergen Brunswig, also said she did not know which company broached the topic of an acquisition of Standtlander, but said Bergen Brunswig is "looking to monetize all underperforming" Bergen Brunswig subsidiaries or parts of its businesses.