Terms of the deal call for Lisle, Ill.-based SXC to pay $28 in cash and 0.6606 of its shares for each share of Catalyst for total consideration of $81.02 per share, a premium of about 28% over Catalyst's Tuesday close. Post-deal, Catalyst shareholders would own about 35% of the combined company.

The deal comes just weeks after Express Scripts Inc. closed its $29 billion acquisition of Medco Health Solutions, creating a powerhouse competitor in the drug benefits business.

Rockville, Md.-based Catalyst is billed by SXC as one of the nation's fastest-growing prescription management companies, serving self-insured employers including state and local governments, managed care organizations, unions, hospices, third-party administrators and individuals.

The combined company will cover about 25 million members and handle about 200 million prescriptions annually. SXC said the deal would provide plan sponsors, members and physicians with a more comprehensive set of products, creating a company with $13 billion in annual sales that is better able to compete in a rapidly evolving market.

"This is an extremely compelling combination that brings together SXC's industry-leading tools and technology with Catalyst's full-service PBM, best-in-class service and growing client base to create a company that is even better positioned to compete in the marketplace," SXC chairman and chief executive Mark Thierer said in a statement.

"By joining forces, we will be able to accelerate our shared goal of providing affordable and high-quality healthcare solutions that enhance value for employer, health plan and government customers."

Both companies have been consolidators in recent years, with SXC buying HealthTrans LLC for $250 million in November and MedfusionRx LLC for $100 million in 2010. Catalyst, meanwhile, in March 2011 announced plans to buy the pharmacy benefits management unit of Walgreen Co. for $525 million, and in 2010 spent $225 million to acquire FutureScripts LLC from Independence Blue Cross. SXC expects this latest deal to contribute to non-GAAP earnings in 2013, pledging to extract about $125 million in annual cost savings within 24 months of closing. The company said it would finance the transaction with about $1.7 billion in debt secured by J.P. Morgan Chase Bank NA.

J.P. Morgan is lead financial adviser to SXC, with Jed Brody and Mark Hanson of Barclays plc also providing financial advice and a Sidley Austin LLP team including Gary Gerstman, Scott Williams, Sharp Sorensen, Matt Johnson, Mark Langdon, Tracey Nicastro, Marc Raven and David Giardina acting as legal counsel. Heenan Blaikie LLP's Kevin Rooney and Stephanie Sykes also provided counsel.

Catalyst enlisted Goldman, Sachs & Co. as lead financial adviser. Citigroup Inc.'s Ray Cooper, Chris Hite, Barry Blake, Ray Cooper, Igor Sokolovsky and Steven Alcauskas provided additional advice A Milbank, Tweed, Hadley & McCloy LLP team of partners Tom Janson, David Schwartz, Alan Stone, Charles Westland, Russ Kestenbaum, Paul Wessel, Larry Kass, Matt Ahrens, Rick Gray and including associates George Esposito and Nehal Siddiqui served as legal counsel.

-- David Marcus contributed to this report.