Express Scripts 2011 Annual Report Download - page 32

Express Scripts 2011 Annual Report
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Our financial results after the merger will depend on our ability to maintain our and Medco’s client relationships.
A substantial portion of each of our and Medco’s revenues are received under long-term client relationships. Our
success following the merger will depend in part on our ability to maintain these client relationships, including those of
Medco. Medco’s clients may have termination or other rights that may be triggered by the merger, or these clients may
decide not to renew their existing relationships with Medco or, after the merger, with us. If Medco (prior to the completion
of the merger) and we (after the completion of the merger) are unable to maintain these client relationships, our business,
financial results and financial condition could be adversely affected.
We will incur significant transaction and merger-related costs in connection with the merger.
We will incur significant costs in connection with the integration process. The substantial majority of these costs
will be non-recurring expenses related to the merger, facilities and systems consolidation costs. We may incur additional
costs to maintain employee morale and to retain key employees. We will also incur transaction fees and costs related to
formulating integration plans. Additional unanticipated costs may be incurred in the integration of Medco’s businesses.
Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the
integration of the businesses, should allow us to more than offset incremental transaction and merger-related costs over
time, this net benefit may not be achieved in the near term, or at all.
Failure to complete the merger could impact our stock price and our future business and financial results.
If the merger is not completed or our financing for the transaction becomes unavailable, our ongoing business and
financial results may be adversely affected and we will be subject to a number of risks, including the following:
depending on the reasons leading to such termination we could be liable to Medco for substantial termination fees
in connection with the termination of the Merger Agreement and/or the reimbursement of certain of Medco’s
expenses, in amounts up to $950 million
we would be required to redeem the aggregate $7.6 billion of senior notes issued in November 2011 and February
2012 at a redemption price equal to 101% of the aggregate principal amount of such notes, plus accrued and
unpaid interest
we have dedicated significant time and resources, financial and otherwise, in planning for the merger and the
associated integration, rather than on other projects and initiatives
in anticipation of the consummation of the transaction, certain key projects and initiatives have been delayed or
have been designed or implemented in a manner to facilitate the integration of the organizations after the merger
we could be responsible for certain transaction costs relating to the merger, whether or not the merger is completed
while the Merger Agreement is in force, we are subject to certain restrictions on the conduct of our business,
which may adversely affect our ability to execute certain of our business strategies
matters relating to the merger (including integration planning) may require substantial commitments of time and
resources by our management, whether or not the merger is completed, which could otherwise have been devoted
to other opportunities that may have been beneficial to us
In addition, if the merger is not completed, we may experience negative reactions from the financial markets and
from our clients and employees. We may also be subject to litigation related to any failure to complete the merger or to
enforcement proceedings commenced against us to perform our obligations under the Merger Agreement. If the merger is
not completed, these risks may materialize and may adversely affect our business, financial results and financial condition,
as well as the price of our common stock.
If sufficient financing or other sources of capital are not available, we may be subject to significant monetary or other
damages under the Merger Agreement.
We intend to finance all or a portion of the cash component of the merger consideration with debt financing.
However, our ability to obtain financing is not a condition to closing under the Merger Agreement. While the proceeds of
our two recently-completed senior note issuances have provided us with a significant portion of the cash required to
complete the merger transaction, the remaining cash will come from a combination of our term credit facility, our revolving
credit facility and/or cash from operations. We currently believe these sources will provide us with the amounts necessary
to fund the cash component of the merger consideration, and we have also obtained bridge financing in an amount which
we believe would be sufficient to allow us to complete the transaction. However, funding under each of the term credit
facility, the revolving credit facility and the bridge facility is subject to conditions that may not be satisfied at the closing of