SXC Health Solutions Corp. is moving farther from its Canadian roots with each acquisition, but the software and services company has no plans to give up its listing in Toronto due to a strong base of investor support.
For Canadian investors, SXC is one of the few serious technology-related stocks listed on the TSX. What's more, it's been a great performer, having risen more than eight-fold in the past three years.
The company was formed in Canada, but has rapidly expanded in the U.S. by purchasing pharmacy benefit management companies. SXC is now run from offices in suburban Chicago, building a business that helps employers and health plans negotiate better prices for the drugs.
On Wednesday, SXC agreed to pay about $4.1-billion (U.S.) in cash and stock for Catalyst Health Solutions, which would create the fourth-largest company in the pharmacy benefit claims business. SXC shareholders would own about two-thirds of the company, while Catalyst shareholders would own about a third.
Still, the company is committed to its TSX listing, SXC chief financial officer Jeff Park said in an interview.
“We have a lot of great Canadian shareholders,” he said. “The percentage is going down as we grow our share base. The shareholders in Canada have been with us a long time. They understand the story. They might not understand the nuance of the U.S. health-care system, but they know at the base that I get paid every time someone takes a pill.”
The Catalyst transaction is the biggest that SXC has attempted, and will effectively double the size of the company, he said.
Catalyst, like other companies SXC has bought, is a client of SXC's, running its software.
“The value prop is it provides opportunities to save clients money through increased scale,” he said. “And if they're using your technology it eases the integration and is much less disruptive to clients.”
The company estimates it can generate synergies of $125-million, the equivalent of half a year's earnings before interest, taxes, depreciation and amortization for SXC currently.