Why Diplomat Pharmacy Inc Fell Today
Diplomat Pharmacy (NYSE: DPLO) is down 22% at 1:26 p.m. EST Thursday after announcing after the closing bell yesterday that it's acquiring another pharmacy benefit manager (PBM), LDI Integrated Pharmacy Services, for $595 million, including $515 million in cash and another $80 million in stock. The purchase expands on the acquisition of National Pharmaceutical Services (NPS) announced last month, although that was a much smaller $47 million deal.
It's not necessarily the cost of the deal that has investors hitting the sell button. The acquisition comes with $94 million in tax shields, and management thinks it can generate $4 million to $6 million in cost savings in the first year. Combine those two, and Diplomat is paying a reasonable 11.7 times EBITDA -- and the deal will be accretive to earnings next year.
Image source: Getty Images.
Source: Fool.com
