MHS Medcohealth Solutions Common Stock

The wait for investors is finally over as Express Scripts Inc. (ESRX) recently announced that its merger with Medco Health Solutions, Inc. (MHS) might close in the week starting April 2, 2012. The merger is subject to satisfaction or waiver of the remaining closing conditions.

In mid-March, Express Scripts and Medco Health had agreed to extend their merger-closing date. According to the Hart-Scott-Rodino Act, the waiting period for the merger expired on March 12, 2012. However, the companies decided to work with the US Federal Trade Commission (FTC) and planned to close the merger by early second quarter 2012.

Express Scripts had agreed to acquire Medco Health in July last year, for $29.1 billion ($71.36 per share) in cash and stock. At the time of announcing the deal, Express Scripts said that Medco Health shareholders will receive $28.80 in cash and 0.81 shares of Express Scripts for each share of Medco Health that they own.

Following the closure of the acquisition, Express Scripts’ shareholders will own approximately 59% of the merged entity, with Medco Health’s shareholders holding the remaining.

Express Scripts expects to generate $4 billion annually in cash from operations, following the integration of the two companies.

Our View

Currently, we have a Neutral recommendation on Express Scripts. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We note the acquisition of Medco Health will generate more synergies for the two Pharmacy Benefit Management (PBM) companies, in the form of lower cost of prescription drugs and improved quality of healthcare.

 
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