Merck Divests Medco Behavioral Care Corp. for $340 Million

Strategic Insights -

Merck & Co. Inc. announced the signing of a definitive agreement to divest its ownership of Medco Behavioral Care Corp. (MBC) to MBC management and Kohlberg Kravis Roberts & Co. (KKR) for $340 million. The transaction reflects Merck's intention to focus its resources on its core human and animal health business. MBC, one of the nation's largest managed behavioral healthcare companies, will become an independent, privately-held company with Merck retaining a small minority ownership interest.

Key Takeaways:

  • The divestiture of MBC is a strategic move by Merck to focus on its core human and animal health business.
  • MBC, one of the largest managed behavioral healthcare companies, will become an independent company with a minority ownership interest from Merck.
  • The company will retain its headquarters in Park Ridge, N.J. and keep its existing operations intact.
  • Albert S. Waxman, Ph.D., MBC's founder and chairman, will remain in his position, and all other senior executives will stay in their current roles.
  • KKR, a leading private investment firm, will provide the necessary resources and financial strength to achieve MBC's strategic vision.
  • The transaction is expected to be finalized within 60 days pending regulatory review and other customary closing conditions.
  • MBC has led the industry in developing programs for the public sector, particularly for Medicaid populations, and is the foremost provider of "capitated" programs.
  • The company's revenue for the year ending Dec. 31, 1994, was approximately $300 million.

Statistics:

  • $340 million: The total value of the divestiture agreement.
  • $315 million: The amount of cash that will be paid to MBC's shareholders.
  • 15 million: The number of persons that MBC provides mental health managed care and employee assistance services to.
  • 50 states: The geographic reach of MBC's services.
  • 28,000: The number of staff and network providers and facilities that MBC utilizes to deliver its services.
  • $75 billion: The total amount of financing completed by KKR since its founding in 1976.
  • 40 transactions: The number of transactions involving KKR that have been completed since its founding.
  • 40 million: The number of Americans that the Merck-Medco Managed Care Division manages pharmacy benefits for.

Sources:

  • "Business Wire" - July 11, 1995
  • Merck & Co. Inc. press release - July 11, 1995
  • Medco Behavioral Care Corp. - "Company Overview"
  • Kohlberg Kravis Roberts & Co. - "Company Overview"
  • Merck & Co. Inc. - "Company Overview"