Merger with BioScrip, Inc. — As discussed in Note 1, Nature of Operations and Presentation of Financial Statements, Option Care merged with BioScrip on August 6, 2019. BioScrip was a national provider of infusion and home care management solutions. The Merger of Option Care and BioScrip into Option Care Health created an expanded national platform and the opportunity to drive economies of scale through procurement savings, facility rationalization and other operating cost savings.

The fair value of purchase consideration transferred on the closing date includes the value of the number of shares of the combined company owned by BioScrip shareholders at closing of the Merger, the value of common shares issued to certain warrant and preferred shareholders in conjunction with the Merger, the fair value of stock-based instruments that were vested or earned as of the Merger, and cash payments made in conjunction with the Merger. The fair value per share of BioScrip’s common stock was $2.67 per share. This is the closing price of the BioScrip common stock on August 6, 2019.


	Amount
Number of BioScrip common shares outstanding at time of the Merger (1)	129,181
Common shares issued to warrant and preferred stockholders at time of the Merger (1)	3,458
Total shares of BioScrip common stock outstanding at time of the Merger (1)	132,639
BioScrip share price as of August 6, 2019	$	2.67
Fair value of common shares	$	354,146
Fair value of share-based instruments	$	32,898
Cash paid in conjunction with the Merger included in purchase consideration	$	714,957
Fair value of total consideration transferred	$	1,102,001
Less: cash acquired	$	14,787
Fair value of total consideration acquired, net of cash acquired	$	1,087,214

Cash paid in conjunction with the Merger includes payments made for settlement of $575.0 million in legacy BioScrip debt, $125.8 million in existing BioScrip preferred shares, and $14.1 million in legacy BioScrip success-based fees owed to third-party advisors. HC II financed these payments primarily through cash on hand and debt financing, which is discussed in Note 11, Indebtedness.

The Company’s allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed, net of cash acquired, in the Merger is as follows (in thousands):


	Amount
Accounts receivable, net (1)	$	96,532
Inventories (2)	19,683
Property and equipment, net (3)	48,732
Intangible assets, net (4)	193,245
Deferred tax assets, net of deferred tax liabilities (5)	26,731
Operating lease right-of-use asset (6)	22,378
Operating lease liability (6)	(28,897)
Accounts payable (7)	(66,668)
Other assumed liabilities, net of other acquired assets (7)	(20,663)
Total acquired identifiable assets and liabilities	291,073
Goodwill (8)	796,141
Total consideration transferred	$	1,087,214

(3)The fair value of the property and equipment was determined based upon the best and highest use of the property with final values determined based upon an analysis of the cost, sales comparison, and income capitalization approaches for each property appraised.


	Fair Value		Weighted Average Estimated Life (in years)
Trademarks/Names	$	12,536	2
Patient referral sources	180,329		20
Licenses	380		1.5
Total intangible assets, net	$	193,245	18.8

The Company valued trademarks/names utilizing the relief of royalty method and patient referral sources utilizing the multi-period excess earnings method, a form of the income approach.

(5)Net deferred tax assets represented the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. See Note 6, Income Taxes, for additional discussion of the Company’s combined income tax position subsequent to the Merger.

(6)The fair value of the operating lease liability and corresponding right-of-use asset (current and long-term) was based on current market rates available to the Company.

(8)The Merger resulted in $796.1 million of goodwill, which is attributable to cost synergies resulting from procurement and operational efficiencies and elimination of duplicative administrative costs. The goodwill created in the Merger is not expected to be deductible for tax purposes.

Assuming BioScrip had been acquired as of January 1, 2018, and the results of BioScrip had been included in operations beginning on January 1, 2018, the following tables provide estimated unaudited pro forma results of operations for the years ended December 31, 2019 and 2018 (in thousands). The estimated pro forma net income adjusts for the effect of fair value adjustments related to the Merger, transaction costs and other non-recurring costs directly attributable to the Merger and the impact of the additional debt to finance the Merger.

Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the Merger been completed on the date indicated or the future operating results.

For the periods subsequent to the Merger Date that are included in the results of operations for the year ended December 31, 2019, BioScrip had net revenue of $308.9 million and a net loss of $30.1 million.

Acquisition-related costs were expensed as incurred, with the exception of BioScrip success-based fees that are included in consideration transferred. The Company recorded transaction costs that are expensed in selling, general and administrative expenses during the year ended December 31, 2019 of approximately $25.8 million. Transaction expenses consisted of professional fees for advisory, consulting and underwriting services as well as other incremental costs directly related to the acquisition.

Baptist Health Asset Acquisition — In August 2018, pursuant to the Purchase and Sale Agreement dated August 8, 2018, Option Care completed the acquisition of certain assets of Baptist Health in Little Rock, Arkansas for a purchase price of $1.0 million.

Home I.V. Specialists, Inc. Acquisition — In September 2018, pursuant to the Stock Purchase Agreement dated September 18, 2018, Option Care completed the acquisition of 100% of the outstanding shares of Home I.V. Specialists, Inc. (“Home I.V.”) for a purchase price of $11.6 million, net of cash acquired. The total consideration was comprised of cash paid of $9.8 million and a contingent payment of $1.8 million payable one year after the acquisition date. During the year ended December 31, 2019, the Company reduced the contingent liability by $0.3 million. During the year ended December 31, 2020, the Company determined that the contingent payment was not payable and reduced the remaining contingent liability by $1.5 million.