Healthcare group McKesson and private equity firm Clayton Dubilier & Rice are closing in on a deal to buy the largest independent provider of medical infusion services in the US, valuing the business at more than $5bn including debt.
Option Care Health is in advanced talks to sell itself after receiving a joint bid from McKesson and CD&R, according to people familiar with the matter. A deal could be reached as soon as Tuesday, but it is yet to be formally agreed and discussions could fall apart, the people said.
Option Care last year served more than 315,000 patients nationwide requiring speciality medicines to treat illnesses such as cancer, autoimmune diseases and serious infections, via its at-home infusion services and at its 184 care centres.
The potential transaction would be the latest in a series of buyouts of undervalued healthcare services companies, including mid-market private equity group Kinderhook’s $1.1bn recent takeover of home care and hospice group Enhabit.
The high costs of delivering medicines in hospitals and drugmakers’ push towards complex biologic medicines, which can only be administered via infusion, have provided a significant boost to Option Care’s business.
The deal was expected to value Option Care at more than $5bn including debt, the people said. Shares in Option Care were down 27 per cent this year at Monday’s close, giving it an enterprise value of $4.7bn including its $1.2bn debt pile.
Shares in Option Care jumped by 22 per cent in post-market trading on Monday after the FT reported that a go-private deal was near.
Under the terms of the deal being discussed, CD&R would own a 51 per cent stake in Option Care through a joint venture with McKesson, which would own a 49 per cent stake, the people said. McKesson would have the right to purchase the buyout firm’s stake in the future, they added.
CD&R, which has a reputation as a complex carve-out specialist, has a history of collaborating with major healthcare companies including its purchase of a 50 per cent stake in Sanofi’s consumer health business Opella and its partnership with Elevance Health to combine some of their primary care businesses. CD&R also owns hospice provider Gentiva Health Services alongside Humana.
For McKesson, Option Care’s collection of at-home, oncology-focused and speciality infusion centres will complement its core business as the biggest US drug distributor. McKesson operates an extensive network of chemotherapy and cancer care clinics — one of the fastest-growing divisions of the $403bn-a-year revenue company.
Option Care and McKesson did not immediately respond to requests for comment. CD&R declined to comment.
Shares in McKesson are up 11.5 per cent since the start of the year, giving it a market capitalisation of about $107bn. Last month, the group struck a roughly $2.2bn deal to buy privately held Precision Medicine Group, a provider of clinical research and commercialisation services to drugmakers as part of the company’s push to grow its fastest-growing divisions.
McKesson’s chief financial officer Kenny Cheung last month said he would pursue growth by “being able to find the right deals that’s accretive . . . for overall platform and portfolio”.
Meanwhile, CD&R is seeking $26bn for its latest flagship fund, which would rank among the biggest raised in the buyout industry. The group has also sealed several successful exits this year, including offloading Indicor’s instrumentation business to industrials group Ametek for $5bn.