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's happening: Shares of the pharmacy-benefits manager and healthcare information technology specialist Catamaran Corp. (UNKNOWN:CTRX.DL) rose by 25% today on exceptional volume after the company announced a buyout agreement with UnitedHealth Group (NYSE:UNH) for $12.8 billion, or $61.50 a share.
The deal comes at a 27% premium compared to where Catamaran's shares finished up last Friday and is expected to close in the fourth-quarter of this year. UnitedHealth will finance the purchase via a mixture of cash and debt, according to the press release.
Why it's happening: UnitedHealth is reportedly interested in pairing Catamaran's pharmacy benefits management business with its OptumRx segment, resulting in a combined entity that is expected to fill over a billion prescriptions this year.
What's key to understand is that this buyout dramatically amps up UnitedHealth's position in the ongoing drug pricing wars that led to the marked reduction in the cost of next-generation hep C drugs recently.
Looking ahead, pharmacy benefits managers are believed to be eyeing costly cancer and specialty drugs as the next targets in their concerted efforts to reduce costs. And UnitedHealth now appears set to play a major role in these negotiations.
All told, this deal should end up translating into improving profit margins and lower expenses for UnitedHealth, making its stock worth checking out by long-term oriented investors.
George Budwell has no position in any stocks mentioned. The Motley Fool recommends Catamaran and UnitedHealth Group. The Motley Fool owns shares of Catamaran. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.