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Rite Aid to acquire EnvisionRX for $2B


Rite Aid is set to acquire leading independent pharmacy benefit manager Envision Pharmaceutical in a deal valued at $2 billion.

EnvisionRx is a national, full-service pharmacy benefit management company with projected 2015 calendar year revenues of approximately $5 billion and projected 2015 calendar year EBITDA in a range of $150 to $160 million. The company provides both transparent and traditional PBM options through its EnvisionRx and MedTrak PBMs, respectively, as well as pharmacy-related services to clients across the nation. EnvisionRx also offers fully integrated mail-order and specialty pharmacy services through Orchard Pharmaceutical Services; access to the nation’s largest cash pay infertility discount drug program via Design Rx; an innovative claims adjudication software platform in Laker Software; and a national Medicare Part D prescription drug plan through Envision Insurance Company’s EnvisionRx Plus product offering.

“The acquisition of EnvisionRx meaningfully expands our health and wellness offerings, enhancing our ability to provide a higher level of care to the patients and communities we serve,” said Rite Aid Chairman and CEO John Standley. “With the addition of EnvisionRx, we will create a compelling pharmacy offering across retail, specialty and mail-order channels, enabling us to deliver cost-effective solutions to employers and health plans while driving growth and creating long-term value for our shareholders. We also look forward to welcoming EnvisionRx’s proven management team and talented associates to Rite Aid.”

“Combining our comprehensive suite of pharmacy benefit management services with Rite Aid’s established retail healthcare platform is a natural fit that is increasingly preferred by plan sponsors,” said EnvisionRx CEO Frank Sheehy. “Together, we see tremendous opportunities to provide new and existing customers with an integrated healthcare offering that will build upon the company’s strong existing platform.”

“EnvisionRx’s innovative business model has always set it apart from other PBMs, and as part of a recognized pharmacy leader, will now be well positioned for further success,” said Sharad Mansukani, chairman of EnvisionRx and senior adviser for TPG. “TPG believes EnvisionRx has built a best-in-class company with tremendous potential, and as a ground-breaking PBM, it has a great future as part of Rite Aid.”

Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Rite Aid will pay approximately $1.8 billion in cash and $200 million in Rite Aid stock, or approximately 27.9 million shares.

The transaction is expected to be accretive to Rite Aid’s earnings per share in the first full year following the closing of the transaction. The transaction is expected to close by September 2015, subject to regulatory approvals and other customary closing conditions.

Following the closing, EnvisionRx will operate as a wholly owned subsidiary of Rite Aid led by Frank Sheehy and current management. EnvisionRx’s headquarters will remain in Twinsburg, Ohio.

In connection with the pending transaction, Rite Aid has obtained committed financing from Citigroup Global Markets, and BofA Merrill Lynch, Wells Fargo Securities and Credit Suisse AG. Subject to market conditions, Rite Aid expects to finance the $1.8 billion cash portion of the consideration through proceeds from the issuance of unsecured notes prior to the closing of the acquisition.

Citigroup Global Markets served as financial advisor to Rite Aid and Skadden, Arps, Slate, Meagher & Flom was the company’s legal advisor. J.P. Morgan served as exclusive financial advisor to EnvisionRx, and Cleary Gottlieb Steen & Hamilton acted as its legal counsel.
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