Why Catalyst Health Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of pharmacy benefits manager Catalyst Health Solutions (Nasdaq: CHSI  ) soared 31% Wednesday after peer SXC Health Solutions (Nasdaq: SXCI  ) announced plans to acquire it in a deal worth about $4.4 billion.

So what: The cash-stock deal values Catalyst at $81 per share and represents a juicy 28% premium over its Tuesday closing price. The move comes amid heavy consolidation in the industry and will allow SXC to compete on a much larger scale. The combined company will have roughly $13 billion in revenue and cover 25 million members, so it's no surprise that even SXC's shares are rallying on the news.

Now what: The deal, which should close in the second half of this year, is expected to add to SXC's adjusted earnings in 2013 and save about $125 million in costs over the next couple of years. "This is an extremely compelling combination that brings together SXC's industry-leading tools and technology with Catalyst's full-service P.B.M., best-in-class service and growing client base to create a company that is even better positioned to compete in the marketplace," said SXC Chairman and CEO Mark Thierer. So while Catalyst might be all popped out, the new SXC might be a long-term opportunity worth looking into.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of SXC. Try any of our Foolish newsletter services free for 30 days.

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