BrightSpring, PharMerica Merge in $1.32 Billion Deal

Global investment firm KKR and an affiliate of Walgreens Boots Alliance Inc. (Nasdaq: WBA) closed on their $1.32 billion acquisition of home- and community-based care BrightSpring Health Services on Wednesday.

BrightSpring — formerly ResCare — merged with pharmacy company PharMerica as part of the deal.

While home-focused M&A activity has hit record levels over the past few years, the move to bring BrightSpring and PharMerica together is noteworthy because it blends the strengths of a diverse home care giant and a multi-state pharmacy powerhouse. Moving forward, executives say, a combined BrightSpring and PharMerica will have a heightened ability to manage complex medication regimens and monitor adherence on a regular basis in individuals’ homes.

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Up to 26% of hospital readmissions are preventable and related to medication issues, past research has found.

“Greater independence, improved health outcomes and reduced hospitalizations all depend on three things to be present — non-clinical support services, daily medication optimization and clinical monitoring and interventions when required, which is what we are focused on providing to deliver value as a combined company,” former PharMerica CFO Bob Dries said in press release.

Dries will serve as president of PharMerica under the combination. BrightSpring’s Jon Rousseau will lead the overall enterprise as its CEO.

The merged company will have combined revenues of about $4.5 billion and serve more than 300,000 clients daily across 47 states, in addition to Puerto Rico and Canada. It will maintain a headquarters in Louisville, Kentucky, where both BrightSpring and PharMerica are based.

BrightSpring is one of the country’s largest providers of diversified home- and community-based health services for seniors, as well as non-seniors and individuals with intellectual or developmental disabilities. Expanding the company’s clinical and care management capabilities has been a priority for Rousseau ever since he took over as CEO in 2016.

The merger with PharMerica is yet another example of that, he previously told Home Health Care News after plans were first announced.

“What we’re trying to do is have a class of assets in our target geography to give us that capability set, ultimately working in a highly integrated way to the benefit of our client and the benefit of our company,” Rousseau said. “We really believe that pharmacy is essential and, in many ways, the front lines in keeping patients out of the emergency room and out of the hospital.”

PharMerica Corporation is a provider of institutional and community-based pharmacy services for the long-term care, senior living, hospital, home infusion, behavioral, specialty and oncology pharmacy markets. The company has operations in 96 institutional pharmacies, 20 specialty home infusion pharmacies and five specialty oncology pharmacies across 45 states.

Walgreens in the background

In total, there were at least 715 private equity health care deals that closed by the middle of December 2018, according to PitchBook data. KKR was a part of the biggest — a $9.9 billion acquisition of Envision Healthcare.

KKR’s deal for BrightSpring with the Walgreen Boots Alliance affiliate is likewise one of the largest PE health care deals over the past 12 or so months, ranking just below the $1.4 billion Humana Inc. (NYSE: HUM), TPG Capital and Welsh, Carson, Anderson & Stowe paid for hospice provider Curo Health services.

“Today marks the start of a new and exciting chapter for BrightSpring and PharMerica,” KKR member Max Lin said in a press release. “We look forward to working with the team on the combined company’s next phase of growth and development.”

ResCare — under the private equity ownership of Onex Corporation — rebranded as BrightSpring Health Servies in August. Shortly after rebranding, rumors began circulating that Onex was looking to sell the company.

Broadly, the BrightSpring-PharMerica merger reflects the growing trend of health care investors seeing value in the “touchpoints” home-based care providers bring to the table, Stoneridge Partners President Rich Tinsley told HHCN.

Stoneridge Partners is a health care mergers-and-acquisitions advisory firm involved in the brokerage of home care, hospice and behavioral health agencies.

“The more you ‘touch’ an individual and the more you can understand them where they are, the longer you can keep them out of a higher cost setting,” Tinsley said. “Managing that pharmacy piece is a really big deal.”

From an M&A standpoint, it will be interesting to follow the BrightSpring-PharMerica enterprise, especially as KKR eventually seeks an exit, perhaps opening the door further for Walgreens through its affiliate, currently a minority investor.

Walgreens has already made its interest in the aging-in-place discussion known. In June, the company teamed up with Humana to pilot senior-focused health clinics located in Walgreens stores in Kansas City, Missouri.

“KKR will want to exit in three to seven years. What will Walgreens want to do then?” Tinsley said. “I can imagine Walgreens being the majority owner at some point, as all retail health care folks are trying to figure out how they can get into the home.”

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