Magellan Health Services To Buy CDMI LLC - Quick Facts

(RTTNews) - Magellan Health Services Inc. (MGLN) announced that it agreed to acquire CDMI LLC, a privately-held company that provides a range of clinical consulting programs and negotiates and administers drug rebates for managed care organizations or MCO and other customers.

The base purchase price is $205 million plus potential contingent payments up to a maximum aggregate amount of $165 million. The base purchase price includes $125 million to be paid in cash at closing, and $80 million to be reinvested in Magellan restricted common stock by the principal owners and certain key management of CDMI. The $80 million in Magellan restricted common stock will be subject to vesting over a 42-month period, and is conditional upon certain employment and performance targets.

In addition to the base purchase price, there is a contingent payment of up to $65 million which will be paid depending upon CDMI's performance relative to certain targets for 2015 rebate retention.

Additionally, there is a potential earn-out opportunity of up to $100 million, of which up to $65 million is dependent upon the number of CDMI customers that become full-service PBM customers during 2015 and 2016, and potential cash payments of up to $35 million based upon achievement of 2014 and 2015 gross profit performance targets.

Headquartered in Newport, R.I., and founded in 2009 by experienced pharmacy executives, CDMI has established strong relationships with MCOs and drug manufacturers. CDMI works with over 30 health plans, and in 2013 had net revenues of approximately $43 million, primarily derived from rebate management.

Following the closing of the acquisition, George Petrovas, co-founder and executive vice president of CDMI, will serve as president of CDMI, which will operate as part of Magellan Rx Management.

Closing of the transaction is expected in the second quarter of 2014 and is subject to the expiration of the Hart-Scott-Rodino Antitrust Act waiting period and other customary closing conditions.