McKesson To Acquire Celesio In $8.3 Bln Deal

(RTTNews) - Healthcare services and information technology company McKesson Corp. (MCK) plans to buy German drug distributor Celesio AG (CAKFF.PK) in a transaction valued at about $8.3 billion, including debt.

The deal, which has attracted media attention for some time, is said to benefit McKesson in enhancing its share of the generic drug market globally.

McKesson agreed to buy majority stake in Celesio AG for 23 euros per share and would also launch parallel voluntary public tender offers for the remaining publicly-traded shares and outstanding convertible bonds of Celesio.

Celesio is a wholesale and retail company and provides logistics and services to the pharmaceutical and healthcare sectors.

The offer price of 23 euros per share represents a 39 percent premium over the three-month volume weighted average price before speculation began on October 8.

Under the terms of a share purchase agreement between McKesson and Celesio's majority shareholder Franz Haniel & Cie. GmbH, McKesson has agreed to acquire Haniel's stake in Celesio that currently represents 50.01 percent of the total outstanding shares of the company.

The agreement has been approved by McKesson's Board of Directors and Haniel's Supervisory Board.

McKesson will launch parallel tender offers for Celesio's publicly-traded shares at 23 euros per share. The tender offers are expected to commence during McKesson's fiscal third quarter of 2014 and conclude in the fiscal fourth quarter of 2014, but no earlier than January 17, 2014.

McKesson expects the transaction to add $1.00 to $1.20 to its adjusted earnings per share in the first twelve months after the completion of the tender offers, assuming that the firm achieves 100 percent ownership of the shares of Celesio at the conclusion of the offers.

The share purchase from Haniel and the tender offers are subject to some conditions, including regulatory approvals and the acquisition by McKesson of a minimum of 75 percent of the shares of Celesio.

The combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector.

John Hammergren, CEO of McKesson, said, "The healthcare industry is evolving rapidly, marked by convergence between segments and increased globalization. With today's announcement, we will bring together the strengths and expertise of each company to address global healthcare challenges."

After the transaction is completed, McKesson and Celesio are expected to maintain their own brands and continue to support customers through existing channels.

The operations of Celesio will be part of McKesson's Distribution Solutions segment and will be headed by Paul Julian, executive vice president and group president.

The combined group is expected to have annual revenues in excess of $150 billion, 81,500 employees and operations in more than 20 countries.

McKesson and Celesio deliver to about 120,000 pharmacy and hospital locations on a daily basis in the U.S., Canada, Europe and Brazil. This includes over 11,000 pharmacies that are owned or are part of a strategic banner or franchise network of community pharmacies.

By the fourth year after the completion of the steps to obtain operational control of Celesio, McKesson expects to realize annual synergies between $275 million and $325 million.

McKesson plans to fund a portion of the transaction with cash. The company has put a bridge financing facility in place to fund the balance of the transaction.

MCK closed up 0.7 percent on Wednesday at $143.05.

Benefiting from media reports, Celesio share surged over 6 percent to settle at 21.73 euros.