The parent company of Baltimore's NeighborCare said yesterday that it had abandoned a bid to buy an Ohio health care company, a deal that would have created the nation's second-largest institutional pharmacy.
Genesis Health Ventures Inc., of Kennett Square, Pa., withdrew its offer after it was outbid by Omnicare Inc., of Covington, Ky.
Genesis had offered to buy NCS HealthCare of Cleveland for $3.50 a share in hopes of merging it with NeighborCare, its pharmacy and medical supply chain. Genesis officials said Omnicare offered $5.50 per share for NCS.
Omnicare, the country's largest institutional pharmacy, also will assume $323 million in NCS debt, pushing the value of the deal to about $453 million. There are 23.7 million shares outstanding.
"It got pricey," said Lisa Salamon, a Genesis spokeswoman. "It got beyond what we thought it was worth."
"NCS was near bankruptcy and troubled financially. We made what we thought was a fair offer," she said.
Genesis had argued that it had a binding agreement to buy the company, but Omnicare challenged the exclusivity in court.
The Delaware Chancery Court ruled in Genesis' favor, but last week the Delaware Supreme Court overturned that decision and ordered the deal blocked.
Genesis officials said they didn't want to pursue another lengthy legal battle. "It could languish for months, if not a couple of years, and we could still not get a positive solution," Salamon said.
Analysts said Genesis had no choice but to withdraw from the bidding to buy the financially troubled NCS.
"I think the price that Omnicare was bidding didn't leave much on the table," said Michael LeConey, health research director for Gilford Securities in New York.
"To pay a higher price would have valued NCS at above what it could earn. I think Genesis probably could have afforded it, but I don't think the return would have been worth it."
Omnicare officials said they expect to close soon on the deal with NCS.
"We believe it is a compelling and strategic combination that enhances our leadership in the industry and is a superior geographic fit for Omnicare," spokesman Todd Glass said.
This is the second deal in less than a year in which Omnicare has outbid Genesis. Genesis announced a deal last year to buy American Pharmaceutical Services out of bankruptcy for $42 million, plus up to $18 million in deferred payments.
Omnicare offered a higher price in a U.S. Bankruptcy Court auction and closed the deal in January for $97 million and up to $18 million in deferred payments.
The bidding failures haven't deterred expansion plans at Genesis, where officials said they would continue to look for other companies to acquire.
"We're looking in pharmaceutical and rehabilitative services areas to grow the company," Salamon said.