Rite Aid Corp. (NYSE: RAD) and Envision Pharmaceutical Services (EnvisionRx) announced that they have entered into a definitive agreement in which Rite Aid will acquire EnvisionRx for $2 billion from the private equity firm TPG Capital. Under the terms of the agreement, Rite Aid will pay $1.8 billion in cash and $200 million in Rite Aid stock, approximately 27.9 million shares.

EnvisionRx is a national, full-service pharmacy benefit management (PBM) company. Its 2015 calendar year revenues are projected at roughly $5 billion. The company provides both transparent and traditional PBM options through its EnvisionRx and MedTrak PBMs. 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
• Claims adjudication software platform in Laker Software
• National Medicare Part D prescription drug plan through Envision Insurance Company’s EnvisionRx Plus product offering

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The acquisition is expected to be accretive to Rite Aid’s earnings per share in the first full year after the close of the transaction, which is expected to be in September 2015. After the close of the transaction, EnvisionRx will operate as a wholly owned subsidiary of Rite Aid. EnvisionRx’s headquarters will remain in Twinsburg, Ohio.

Rite Aid Chairman and CEO John Standley said:

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. 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.

This acquisition looks to be a real game-changer for Rite Aid. In 2006, CVS Health Corp. (NYSE: CVS) implemented the same strategy when it acquired Caremark. The Caremark acquisition positioned the company to become the nation’s leading manager of pharmacy benefits. Both mergers seem to illustrate the attraction that pharmacy benefits managers have as middlemen between the drug companies and employees.

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In 2011, the PBM business of Walgreen, now Walgreens Boots Alliance Inc. (NASDAQ: WBA), was acquired by Catalyst Pharmaceutical Partners Inc. (NASDAQ: CPRX) for $525 million in cash. However, this did not have the intended result of broadening its pharmacy, health and wellness services. In fact, Walgreen got hammered on revenues and profits because Express Scripts Holding Co. (NASDAQ: ESRX) dropped it the following year.

Shares of Rite Aid were up 10% at $8.32 just after the opening bell. The stock has a consensus analyst price target of $8.73 and a 52-week trading range of $4.42 to $8.62. The company has a market cap of over $7 billion.

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