BIOS BioPlus Acquisition Corporation

Specialty pharmacy services provider, BioScrip Inc. (BIOS) recently announced its decision to dispense with certain community specialty pharmacies and mail service pharmacy business assets to leading drugstore retailer Walgreen Corp. (WAG) for $225 million.

Walgreen's will initially pay $170 million in cash at the closing of the deal, expected in late April 2012. BioScrip will also retain certain accounts receivable and working capital liabilities of $55 million based on its balance sheet at December 31, 2011.

Moreover, BioScrip may also gain an additional $60 million from Walgreen's depending on whether Walgreen's retains certain business included in the transferred businesses. Revenues from the transferred business for the nine-months ending September 30, 2011 were $938.5 million with gross profit of $73.7 million (7.9% of sales).

While BioScrip expects this transaction to be accretive to its earnings in 2012, Walgreen's anticipates the transaction to have no material impact on its earnings in fiscal 2012. However, the transaction will be moderately accretive in fiscal 2013.

Following the announcement of the deal, BioScrip's shares shot up 15.07% to $6.72 on Thursday while Walgreen's stock rose 1% to $33.53.

Walgreen's believes that the acquisition is a strategic fit and will strengthen its pharmacy services business. With this transaction, Walgreen's will get hold of BioScrip’s community specialty pharmacy business in 30 locations across 16 states in the US and the District of Columbia, primarily serving HIV, oncology and transplant patients.

In addition to that, Walgreen's will also gain some assets of BioScrip's centralized specialty pharmacy business and traditional mail service pharmacy business that dispenses prescriptions for drugstore.com (acquired by Walgreen's in June 2011).

On the financial front, as per the last reported quarter, BioScrip had a highly leveraged balance sheet. Despite lowering its debt by $27.5 million during the quarter, BioScrip had $278.9 million in total long-term debt, much higher than $206.4 million in stockholders’ equity.

BioScrip believes that this transaction will also help the company emphasize more on areas with long-term growth potentials and high returns. The company plans to deploy corporate resources more on Infusion/Home Health industry where it has meaningful strengths and competitive advantages.

With favorable demographic trends, including an aging population in the US, the company is very much optimistic about the future growth prospect of the home health industry. According to the estimates of the National Home Infusion Association (NHIA), alternate-site infusion therapy sector currently represents $9–$11 billion per year in US health care expenditures.

BioScrip presently retains a short-term Zacks #1 Rank (Strong Buy). Walgreen's, on other hand, maintains a short-term Zacks #3 Rank (Hold).

 
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