Merck Sets Medco Spinoff for Summer

Drug giant Merck & Co. said the planned spinoff of its Medco Health Solutions Inc. subsidiary to shareholders should happen this summer.

Merck, which said in April that it would jettison Medco, on Wednesday filed details of the deal with the Securities and Exchange Commission. The transaction is expected to be tax-free to Merck holders.

Medco is a pharmacy benefits management firm that develops prescription benefit programs for employers and runs a mail-order and online pharmacy.

Merck, which bought Medco in 1993, had expected to spin it off last year through an initial public offering but postponed the transaction because of unfavorable market conditions.

Some Merck shareholders have long agitated to get rid of Medco, saying its lower-margin business hurts Merck’s stock.

Under the deal, Medco would pay Merck $1.5 billion from proceeds raised in a debt offering.

Merck shares fell 60 cents to $55.74 on the New York Stock Exchange. The deal’s details were announced after markets closed.

Separately on Wednesday, another planned stock deal -- the initial public offering of DigitalNet Holdings Inc. -- was withdrawn. The Herndon, Va.-based firm, a provider of technology services to the government, said it canceled the plans because of market conditions.

The company had hoped to sell 6.25 million shares at $14 to $16 each. The IPO was postponed on May 6, but some investors believed DigitalNet might try again.

Few companies have been able to sell new stock issues in recent months despite the market’s broad rally.