Omnicare seeking acquisitions as part of strategy to increase shareholder value

By Jennifer Lanning Drey

Portland, Ore., June 26 - Omnicare Inc.'s long-term plans for increasing shareholder value include pursuing acquisitions that will leverage the company's infrastructure and drug acquisition costs, Joel F. Gemunder, Omnicare's chief executive officer, said Tuesday during a presentation at the Jefferies Healthcare Conference in New York.

"Today, we're continuing with an aggressive program to make small pharmacy acquisitions that can easily fold into our existing operations given our very broad geographic coverage, and these acquisitions are highly accretive and produce highly attractive returns.

"Moreover, an important part of our growth strategy has been to broaden our growth platform by entering adjacent markets," Gemunder said.

The company will fund acquisitions using what Gemunder called its "substantial" operating and free cash flow and "solid" balance sheet.

In the first quarter, Omnicare's operating cash flow reached $175 million-the highest level in the company's history, according to Gemunder.

"We're focused on enhancing cash flow to create long-term value, and one of the most efficient uses of our cash is our proven acquisition strategy, given our size, scale and ability to achieve synergies," he said.

Pharmacy acquisitions provide Omnicare the opportunity for a 30% after-tax return on its invested capital, he added.

Gemunder also said Omnicare is in the midst of carrying out its "full potential plan," which was announced in July 2006 and is expected to generate $50 million to $100 million in incremental cash flow by its completion through reductions in inventory and working capital.

The company also expects to improve its balance sheet in 2007 through increased free cash flow, according to Gemunder.

Omnicare is a Covington, Ky.-based provider of pharmaceutical care for the elderly.

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