(Reuters) - Diplomat Pharmacy Inc (DPLO.N) on Monday agreed to UnitedHealth Group Inc’s (UNH.N) over $300 million buyout offer, weeks after it warned of its inability to pay off some of its debt amid intense competition in the pharmacy benefits management business.
Health insurer UnitedHealth’s offer of $4 per share in cash is at a 31% discount to Diplomat’s closing price on Friday and is a far cry from the company’s peak market valuation in 2015, when its shares had traded as high as $52.
“It’s hard for me to call it (UnitedHealth’s offer) a godsend on a stock that has gone from over $50 to now a take-under... I would not call this a great day for Diplomat,” Baird analyst Eric Coldwell told Reuters.
Diplomat’s shares, having fallen 57% for the year, were trading down at $3.96 on Monday.
The company in August announced a review of its options, including putting itself up for sale, in the wake of customer losses in its pharmacy benefits management (PBM) business.
Diplomat’s recent woes were driven mainly by insurers aggressively directing scripts to their own in-house specialty pharmacies, which will now be mitigated with the company under the UnitedHealth roof, according to Evercore ISI analyst Michael Newshel.
Started out in 1975 as a neighborhood pharmacy that also provided specialty pharmacy services, Diplomat forayed into the PBM business in 2017 with back-to-back purchases of LDI Integrated Pharmacy Services and National Pharmaceutical Services.
Although Diplomat has experienced challenges and its entry into the PBM market has not panned out as hoped, the acquisition is a solid move for UnitedHealth from both a strategic and financial standpoint, Cantor Fitzgerald analyst Steven Halper said in a note.
UnitedHealth’s pharmacy services Optum unit, which will house Diplomat, brought in $28.76 billion in the third quarter, while Diplomat’s total revenue during the same quarter was $1.30 billion.
The deal is the latest from UnitedHealth to expand its specialty pharmacy business and would help build out its footprint of lower-cost home infusion therapy services.
Last year, the largest U.S. health insurer acquired Phoenix-based specialty pharmacy Avella and acquired Genoa Health, which runs pharmacies in behavioral health clinics.
Reporting by Saumya Sibi Joseph in Bengaluru; Editing by Shinjini Ganguli