Omnicare completes purchase of Baltimore-based NeighborCare

Jobs losses are expected at the local headquarters, analysts and experts say

July 29, 2005|By M. William Salganik | M. William Salganik,SUN STAFF

It took more than a year to get the two companies to the table, but less than a month from the announced start of talks to complete the deal. Pharmacy giant Omnicare Inc. announced yesterday that it has completed its purchase of Baltimore-based NeighborCare.

In the short term, Omnicare indicated, there will be no change in NeighborCare's operations.

Analysts and industry experts expect Omnicare to eliminate most or all of NeighborCare's 500 headquarters jobs in downtown Baltimore, consolidating corporate functions at its headquarters in Covington, Ky., across the river from Cincinnati.

"We are in the early stages of reviewing NeighborCare's operations and developing our integration plans," an Omnicare spokesman said yesterday. "We are looking forward to a smooth and seamless integration process and will make decisions that are in the best interests of the combined company."

Omnicare already was the largest institutional pharmacy in the country, filling prescriptions for nursing homes and assisted-living centers; it serves more than a million nursing home beds in 47 states. NeighborCare increases the bed count by 27 percent and creates a company with $6 billion in projected revenue.

Omnicare, which needed 80 percent of NeighborCare's shares to complete the deal, said yesterday that 97.2 percent had been offered at $34.75 a share - roughly double NeighborCare's share price in April 2004, when Omnicare launched a hostile takeover bid.

Omnicare initially offered $30 a share, which NeighborCare's board rejected as too low. Omnicare then made its $30 bid directly to shareholders, but never got 80 percent of the stock offered in response to its tender.

For more than a year, the companies didn't talk. Meanwhile, however, with Omnicare's tender bid on the table, the potential deal underwent a lengthy review by federal antitrust regulators.

The Federal Trade Commission said June 17 that it wouldn't object to the deal on antitrust grounds, setting off a chain of events that moved the transaction rapidly from not-talking to completed deal.

Omnicare immediately upped its offer to $32, and NeighborCare again said it wasn't enough. But by July 5, the companies announced they were in talks, and two days later, they said they had agreed on the $34.75-a-share deal. Including assumed debt, the deal values NeighborCare at $1.8 billion.

Completion of the acquisition triggers "golden parachutes" for NeighborCare's top executives and board members. Ten executives and directors would get $33 million in total as a cash-out for their NeighborCare stock options, according to a NeighborCare filing this week with the Securities and Exchange Commission. In addition, five managers could collect as much as $5.6 million in severance payments if they're terminated by Omnicare.

John J. Arlotta, NeighborCare's chairman and chief executive officer, would get $14.8 million in stock-option cash-out and another $3.6 million in severance if Omnicare doesn't retain him.

NeighborCare has existed in its current form for slightly more than a year and a half. It was founded as a privately held business in 1980 in Baltimore, sold in 1996 to a Pennsylvania nursing home chain, then split off as a separate, publicly traded company in December 2003.

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