Diplomat Pharmacy finds 'white knight' in UnitedHealth Group
(12/9/2019) - There's an offer on the table to help Diplomat Pharmacy get out of financial distress.
Less than a month after the Flint-based company's stock dropped more than 50-percent, UnitedHealth Group is working to buy the company.
The corporation plans to merge Diplomat with it's pharmacy care services business OptumRx.
Diplomat Pharmacy is the 6th largest employer in Flint with more than 1,400 people working for the company.
Diplomat and Minnesota-based OptumRx wouldn't say if any jobs will be lost or added. Neither company is commenting further than their joint press release.
Mid-Michigan investment strategist David Kudla said it's not clear if anyone will lose their jobs yet, but some consolidation will likely happen.
"The fact that there's a solution to sustain operations in some form, is a better solution that what, at least one of the alternatives might've been, would be some form of bankruptcy filing at some point," Kudla explained.
"It really is the white knight they needed to come in and for UnitedHealth, for their OptumRx division, this acquisition makes sense," he added.
Flint's new Mayor Sheldon Neeley has a similar positive outlook.
"It's gonna be better than having a company go belly up," he said. "It's better than the alternative, closing the doors and locking the working people out."
The offer is $4 per share, a total of about $303-million.
Kudla said that's on top of UnitedHealth Group assuming Diplomat's nearly $600-million debt.
The companies said the merger is expected to reduce prescription drug costs.
OptumRx added acquiring Diplomat will give them advantages they didn't have before.
"But, this is common right?" Kudla said. "We see this is in a lot of industries, where these big behemoths will take over the smaller players. So, this does make some sense. This really is good for Diplomat and that they have someone that is going to assume their debt and purchase the entire company."
Co-founder and chairman Phil Hagerman has also agreed to give up his 23-percent share of Diplomat.
Kudla said that's a pretty big indication this sale will go through. But, he explained, a higher bidder could still make an offer.