SXC Health Solutions Corp. to acquire National Medical Health Card Systems, Inc.



    
    -  Compelling strategic fit with highly complementary businesses
    -  Transaction creates leader in Pharmacy Spend Management
    -  $12-14 million of expected annual synergies identified
    -  Transaction expected to be accretive to earnings per share in 2009
    

    LISLE, IL, and PORT WASHINGTON, NY, Feb. 26 /CNW/ - SXC Health Solutions
Corp. ("SXC" or the "Company") (NASDAQ:   SXCI, TSX: SXC) and National Medical
Health Card Systems, Inc. ("NMHC") (NASDAQ:   NMHC) today announced that the two
companies have entered into a definitive agreement for SXC to acquire NMHC
pursuant to an exchange offer. The purchase price will be funded with a
combination of 70% cash and 30% SXC stock, resulting in a transaction value of
approximately $143 million, or an estimated $11.00 per share of NMHC using the
20-day average closing price of SXC stock to value the share portion of the
consideration. This represents a 13% premium to the 20-day average closing
price of NMHC common stock. The boards of directors of both companies have
unanimously approved the transaction, with NMHC's majority shareholders
representing approximately 55% of the total NMHC common shares outstanding on
an as-converted basis having agreed to tender shares into the offer pursuant
to the terms of a stockholder agreement.
    The acquisition is expected to close in the second quarter of 2008, and
is subject to various closing conditions, including a requisite number of NMHC
common shares being tendered into the offer, SXC obtaining financing pursuant
to a commitment letter with GE Healthcare Financial Services and regulatory
approvals. SXC expects to begin to realize synergies in the first year, while
continuing to invest in the migration of NMHC's claims processing systems to
the SXC platform. Excluding special items and including anticipated synergies,
SXC expects the acquisition to be dilutive to SXC's EPS in fiscal 2008 and
accretive thereafter.
    "The acquisition of NMHC is an essential step in our strategic evolution
towards leadership in Pharmacy Spend Management and will create value for the
companies' customers, employees, and shareholders," said Gordon S. Glenn,
SXC's Chairman and CEO. "NMHC's base of 300 customers and 2.3 million lives
under management, coupled with its established mail-order and specialty
pharmacy operations, expands the capabilities of our full-service PBM offering
and is complementary to our traditional software license and ASP business,"
said Gordon S. Glenn, SXC's Chairman and CEO. "In addition, NMHC has valuable
relationships with industry consultants and provides us with a customer base
that has critical mass with third-party administrators, managed Medicaid,
state governments and Taft-Hartley organizations. This transaction helps us
achieve our goal of providing a broad customer base with a comprehensive suite
of technology and benefits-management services under a flexible and
transparent pricing model."
    Mr. Glenn continued, "SXC has a truly unique business model, offering our
clients a pathway for control of their pharmacy benefits program based upon
their individual needs. We continue to invest aggressively in our core license
and ASP processing offerings, and now with the acquisition of NMHC, we have
greatly enhanced the capabilities of our informedRx(TM) full service PBM
offering. We are the only company in the PBM space to offer customers such a
broad portfolio of solutions."
    After closing, SXC's competitive position will center on an innovative
mix of market expertise, information technology, clinical capability, scale of
operations and mail order and specialty pharmacy offerings. The combined
company will be uniquely positioned to service a wide variety of healthcare
payor organizations including health plans, Medicare, managed and
fee-for-service state Medicaid plans, long-term care facilities, unions,
third-party administrators (TPAs) and self-insured employers. The combined
company is also expected to benefit from cost synergies and enhanced
opportunities for revenue growth and increased profitability.
    "We believe that our strengths in providing a full-service suite of PBM
offerings will blend well with SXC's leadership in PBM information
technology," said Tom Erickson, NMHC's Chairman and interim CEO. "We are
looking forward to partnering with SXC to leverage their technical and market
expertise to continue to strengthen and grow our own business. SXC is an
emerging leader in the PBM industry with a strong financial foundation. We
believe that our employees and shareholders will be pleased with the new
opportunities the combined company offers."
    "We are also excited about the opportunity this combination offers us to
better serve our customers," Mr. Erickson continued. "The combination enhances
our capabilities with advanced technology, new clinical programs, an expanded
customer service organization, and increased financial flexibility.
Furthermore, leveraging SXC's technology will enable us to provide our
customers with better execution, more sophisticated reporting, and expanded
capabilities in areas such as Medicare Part D. We also believe our strong PBM
skill set and culture will merge well with SXC's informedRx(TM) offering,
helping us move forward with SXC to offer a compelling and competitively
differentiated market offering."

    Terms of the Transaction

    A subsidiary of SXC will commence an exchange offer for shares of NMHC
common stock. Tendering stockholders will receive $7.70 in cash and
0.217 shares of SXC common stock. If completed, the exchange offer will be
followed by a back-end merger for the same consideration as that offered in
the exchange offer. Under certain circumstances, SXC and NMHC have agreed that
SXC will terminate the exchange offer and will instead seek to consummate the
acquisition of NMHC by a one-step merger following the adoption of the merger
agreement by NMHC's stockholders. The exchange ratio is fixed, and will not
fluctuate with changes in the market price of either stock, as such,
approximately 2.9 million shares of SXC common stock will be issued for the
transaction to be completed. SXC will finance a portion of the purchase price
through a secured $48.0 million Term Loan combined with a $10.0 million
revolver from a syndicate led by GE Healthcare Financial Services.
    As a result of the transaction, the combined company expects to have
approximately 24.0 million basic shares outstanding after the acquisition is
complete, composed of 21.0 million currently outstanding shares of SXC common
stock and 2.9 million shares of SXC common stock to be issued to NMHC
shareholders.

    Financial Considerations

    SXC has identified synergy opportunities in operating expenses, revenue
and capital expenditures. Expected synergy opportunities include approximately
$6.0-8.0 million of cost savings and revenue opportunities in the first
12 months post-closing. This is expected to increase to $12.0-14.0 million or
more in year two. SXC believes revenue synergy opportunities exist in network
and rebate optimization, as well as in cross-sell opportunities with clinical
programs, specialty pharmacy and mail service pharmacy.
    It is anticipated that the combined balance sheet will include
unrestricted cash in excess of $24.0 million and long-term debt of
approximately $48.0 million.
    The combined company will be headquartered in Lisle, Illinois, under the
leadership of Gordon S. Glenn as Chairman and CEO. Mark Thierer of SXC will
remain President and COO and Jeff Park, Senior Vice President, CFO and
Secretary of SXC will serve in the same capacity. The parent company will
continue to be SXC Health Solutions Corp. and NMHC will be treated as a
wholly-owned subsidiary of the U.S. company (SXC Health Solutions, Inc.) and
renamed informedRx(TM). Both SXC and NMHC currently have approximately
440 employees.

    Advisors

    In connection with the transaction, Houlihan Lokey is acting as financial
advisor to SXC, Healthcare Growth Partners as strategic advisor and Sidley
Austin LLP is legal counsel. JP Morgan is advising NMHC and Bass, Berry & Sims
PLC is legal counsel.

    Conference Call and Additional Materials

    SXC and NMHC will hold a live combined conference call and simultaneous
audio webcast with PowerPoint slides on Tuesday, February 26, 2008 at
8:30 a.m. ET to discuss this announcement. The conference call can be accessed
by dialing 800-591-7539, or 416-644-3427. The webcast can be accessed through
the investor section of SXC's website at www.sxc.com or at www.newswire.ca. A
telephone replay of the call will be available through March 4, 2008 and can
be accessed by calling 877-289-8525, or 416-640-1917, and entering the
passcode 21263905; a replay of the webcast will also be available at
www.sxc.com
    The press release, PowerPoint slides, Fact Sheet, conference call replay
and transcript, and Q&A, will be available in the afternoon on Tuesday
February 26, 2008 at www.sxc.com.

    About NMHC

    National Medical Health Card Systems, Inc. provides pharmacy benefit
management (PBM) services in the United States. Its PBM services include
electronic point-of-sale pharmacy claims management, retail pharmacy network
management, mail service pharmacy claims management, specialty pharmacy claims
management, Medicare Part D services, benefit design consultation, preferred
drug management programs, drug review and analysis, consulting services, data
access, and reporting and information analysis. It also owns and operates a
mail service pharmacy and a specialty pharmacy. The company markets its
services through direct sales force, brokers, and consultants. It serves
managed care organizations, local governments, unions, corporations, health
maintenance organizations, employers, workers' compensation plans, third party
health care plan administrators, and federal and state government programs
through its network of licensed pharmacies. The company was founded in 1981
and is headquartered in Port Washington, New York.

    About SXC Health Solutions Corp.

    SXC Health Solutions Corp. (SXC) is a leading provider of pharmacy
benefits management (PBM) services and healthcare IT solutions to the
healthcare benefits management industry. The Company's product offerings and
solutions combine a wide range of software applications, application service
provider (ASP) processing services and professional services, designed for
many of the largest organizations in the pharmaceutical supply chain, such as
Federal, provincial, and, state and local governments, pharmacy benefit
managers, managed care organizations, retail pharmacy chains and other
healthcare intermediaries. SXC is based in Lisle, Illinois with locations in;
Scottsdale, Arizona; Warminster, Pennsylvania; Alpharetta, Georgia; Milton,
Ontario and Victoria, British Columbia. For more information please visit
www.sxc.com.

    Important Additional Information

    This communication is neither an offer to purchase nor solicitation of an
offer to sell securities. The exchange offer (the "Offer") has not yet
commenced. SXC Health Solutions Corp. ("SXC") and Comet Merger Corporation
intend to file a tender offer statement on Schedule TO and a Registration
Statement on Form S-4 (or F-4 as applicable) with the Securities and Exchange
Commission (the "SEC") and National Medical Health Card Systems, Inc. ("NMHC")
intends to file a solicitation/recommendation statement on Schedule 14D-9,
with respect to the Offer. BEFORE MAKING ANY DECISION WITH RESPECT TO THE
OFFER, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THESE DOCUMENTS AND
OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders can obtain copies of
these materials (and all other offer documents filed with the SEC) when
available, at no charge on the SEC's website: www.sec.gov. Copies can also be
obtained at no charge by directing a request for such materials to SXC Health
Solutions Corp., 2441 Warrenville Road, Lisle, Illinois 60532-3246, Attention:
SXC Investor Relations or National Medical Health Card Systems, Inc., 26
Harbor Park Drive, Port Washington, New York 11050, Attention: Investor
Relations Department. Investors and security holders may also read and copy
any reports, statements and other information filed by SXC, Comet Merger
Corporation or National Medical Health Card Systems, Inc. with the SEC, at the
SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 or visit the SEC's website for further
information on its public reference room.

    Forward-looking Statements

    This communication contains forward-looking statements. Forward-looking
statements may be identified by words such as "believes", "expects",
"anticipates", "estimates", "projects", "intends", "should", "seeks",
"future", continue", or the negative of such terms, or other comparable
terminology. Forward-looking statements are subject to risks, uncertainties,
assumptions and other factors that are difficult to predict and that could
cause actual results to vary materially from those expressed in or indicated
by them. Factors that could cause actual results to differ materially include,
but are not limited to: (1) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger agreement;
(2) the outcome of any legal proceedings that have been or may be instituted
against NMHC or SXC and others following announcement of the merger agreement;
(3) the inability to complete the Offer or the merger due to the failure to
satisfy the conditions to the Offer and the merger, including SXC's receipt of
financing, the expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the receipt of other
required regulatory approvals; (4) risks that the proposed transaction
disrupts current plans and operations and potential difficulties in employee
retention as a result of the Offer or the merger; (5) the ability to recognize
the benefits of the merger; (6) the actual terms of the financing obtained in
connection with the Offer and the merger; (7) legislative, regulatory and
economic developments; and (8) other factors described in filings with the
SEC. Many of the factors that will determine the outcome of the subject matter
of this communication are beyond NMHC's and SXC's ability to control or
predict. The companies can give no assurance that any of the transactions
related to the Offer will be completed or that the conditions to the Offer and
the merger will be satisfied. The companies undertake no obligation to revise
or update any forward-looking statement, or to make any other forward-looking
statements, whether as a result of new information, future events or
otherwise. The companies are not responsible for updating the information
contained in this communication beyond the published date, or for changes made
to this communication by wire services or Internet service providers.





For further information:

For further information: Jeff Park, Chief Financial Officer, SXC Health
Solutions Corp., Tel: (630) 577-3206, investors@sxc.com; Dave Mason, SXC
Investor Relations - CDN, The Equicom Group Inc., (416) 815-0700 ext. 237,
dmason@equicomgroup.com; Susan Noonan, SXC Investor Relations - U.S., The SAN
Group, LLC, (212) 966-3650, susan@sanoonan.com; Stuart Diamond, CFO, NMHC,
(516) 605-6640, sdiamond@nmhc.com

Organization Profile

Catamaran

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NATIONAL MEDICAL HEALTH CARD SYSTEMS INC.

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