Advance Paradigm to Buy PCS Health Systems

Advance Paradigm Inc. said it would acquire Rite Aid Corp.’s PCS Health Systems Inc. unit for $1 billion, creating the nation’s largest pharmacy benefits manager. The price tag is far below the $1.5 billion that Rite Aid paid for PCS when it acquired the unit from Eli Lilly & Co. in January 1999. Lilly paid $4.1 billion for the business in 1994. News of the deal came a day after Rite Aid posted sharply higher losses for its fiscal first quarter and revised downward its results for fiscal 1998 and 1999. The drugstore retailer has been battered by an accounting scandal, massive debt and what it has called “an overly aggressive expansion program for the last three years.” Irving, Texas-based Advance Paradigm will pay Rite Aid $675 million in cash, $200 million in senior subordinated notes and $125 million in new Advance Paradigm shares, giving Rite Aid, based in Camp Hill, Pa., a 16% stake in Advance Paradigm. Advance Paradigm said it doesn’t expect layoffs. Shares of Rite Aid fell 63 cents to close at $6 on the NYSE, while Advance Paradigm fell $1.50 to close at $21.06 on Nasdaq.