UnitedHealth Group is ready to absorb Catamaran Corp. roughly four months after publicly announcing the takeover.
The Minnetonka, Minn.-based health insurance and services company issued $10.5 billion of debt, nearly all of which will cover the cost of buying Catamaran, a pharmacy benefits manager based in Schaumburg, Ill. UnitedHealth said in March it was acquiring Catamaran for $12.8 billion.
Moody's Investors Service gave an A3 rating to the debt offering. Fitch Ratings and Standard & Poor's also issued investment-grade ratings to the bonds.
The transaction is set to close by the end of this month, UnitedHealth executives said last week during the second-quarter earnings call. UnitedHealth's debt-to-capital ratio increases to 48% with the bond offering, roughly 10 to 20 percentage points above the industry's norm. It plans on reducing that total to 42% by the end of 2016, according to Moody's.
Adding Catamaran to UnitedHealth's OptumRx business gives the company a bigger chunk of the pharmacy benefits market and more clout to negotiate prices with large pharmaceutical firms. OptumRx will now fill about 1 billion prescriptions annually. Only Express Scripts Holding Co. and CVS Health are larger.
UnitedHealth was not Catamaran's only suitor. A filing with the Securities and Exchange Commission shows at least two other unnamed companies expressed serious interest in acquiring Catamaran. It's unknown if Express Scripts or CVS were among the other interested parties.
Catamaran CEO Mark Thierer, who will serve as CEO of OptumRx, also asked for a higher transaction price during negotiations, the filing shows. He proposed an all-cash deal worth $65 per share, but UnitedHealth President Dave Wichmann “immediately rejected the counteroffer.” UnitedHealth ultimately paid $61.50 per share for Catamaran.
