Shares of Diplomat Pharmacy (NYSE:DPLO) were down 32% at 11:44 a.m. EST today after the company announced that it's being acquired by OptumRx, UnitedHealth Group's (NYSE:UNH) pharmacy-care services division.
You read that right: The company is being acquired, and shares went down. The takeout at $4 per share was substantially below the $5.81 that Diplomat Pharmacy closed at on Friday.
It's not often that you see a board of directors agreeing to a take-under -- an acquisition for less than the previous valuation -- but Diplomat was in a pre-cancerous position, in danger of defaulting on its debt. Given the choice of $4 per share or $0 if the company went into bankruptcy, $4 should be considered a win.
It should also be noted that the $4 per share is substantially higher than the $3.10 where Diplomat Pharmacy closed on the day it announced the issue of a potential default on its debt. Shares have run up over the last month or so as investors hoped that management could find a buyer at a higher price; unfortunately, it's often hard to tell the difference between a value stock and value trap.
For UnitedHealth, the deal looks good. Diplomat adds specialty-pharmacy and drug-infusion capabilities. It's unclear what UnitedHealth might do with Diplomat's pharmacy benefit-manager business that it added recently. Perhaps it'll get sold to pay off some of the debt that UnitedHealth is assuming in the deal.
It's possible another company could come along and outbid UnitedHealth, but Diplomat Pharmacy has been reviewing its strategic alternatives since August, so it seems likely a white knight would have emerged already.
There will probably be a lot of grumbling about the low takeout price, but Diplomat co-founder Philip Hagerman, who controls about 23% of the outstanding common stock, has agreed to tender shares, making it more likely that the deal will end up going through.