BioScrip's Deal With Home Solutions Revised, To Close Soon

While further amending the terms of its earlier announced agreement to acquire the Home Solutions business, BioScrip, Inc. (NASDAQ:BIOS) recently noted that the transaction is expected to close by the second week of September.

We note that in its effort to fully concentrate on the Infusion Services business, earlier in June, the company agreed to acquire HS Infusion Holdings, Inc.’s home infusion and home nursing products and services business, Home Solutions.

Home Solutions particularly caters to patients suffering from chronic and acute medical conditions. While the initial closing consideration was $85 million, it was reduced to $75 million later on. The cash component of the consideration was reduced from $80.0 million to $67.5 million.

The latest amendment of the Asset Purchase Agreement specifies that in order to facilitate the timely closure of this transaction, BioScrip and Home Solutions will eliminate the need for stockholders’ approval required to increase its authorized share capital. Instead, they have agreed to a shareholder meeting after transaction closure to seek such approval and provide Home Solutions with certain contractual protections in the event such approval is not obtained.

The combined company is expected to generate revenues of more than $1 billion. Additionally, the acquisition, while accelerating the company’s growth in core business, is likely to generate substantial synergies of between $14−$17 million in cost savings within approximately 12−18 months following the completion. In terms of operating synergy, the inclusion of Home Solutions will benefit BioScrip with respect to supply chain efficiencies, infrastructure optimization, and other corporate and organizational improvements.

We note that over the recent past, BioScrip has been recording persistent growth in its core Infusion Services business where it has a strong presence and enjoys a competitive advantage. BioScrip has already taken a number of steps to focus on the core Infusion business in order to drive further growth therein.

These include the sale of its legacy specialty and mail service pharmacies; the sale of its home health services business; the latest divestment of the PBM business to ProCare Rx; and its plan to sell or transition 9 core patient service activities accumulated through acquisitions, to alliance pharmacy providers.

The company has been engaged in a handful of takeovers and sellouts in recent times as well, the latest example being the impending buyout of Home Solutions. Currently, BioScrip continues to evaluate a huge pipeline of acquisition opportunities to further expand its infusion footprint in the U.S.

Currently, BioScrip carries a Zacks Rank #3 (Hold).

Key Picks in the Sector

Some better-ranked stocks in the broader medical space are Almost Family Inc. (NASDAQ:AFAM) , RadNet, Inc. (NASDAQ:RDNT) and US Physical Therapy Inc. (NYSE:USPH) . All the three stocks carry a Zacks Rank #2 (Buy).

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