McKesson Corp buying German drugs distributor Celesio in $8.3-bn deal
24 October 2013
US health-care-services company McKesson Corp is buying German drugs distributor Celesio for €6.1 billion ($8.3 billion), including debt, in order to create the world's largest pharmaceutical wholesaler.
"The combination of McKesson and Celesio will create a leading global healthcare services platform that will advance our customers' ability to deliver better, more efficient healthcare solutions," said John Hammergren, McKesson's chairman and CEO.
Celesio's majority shareholder, the Haniel family, which holds a 50.01-per cent stake in the company through its holding company Franz Haniel & Cie, has agreed to sell its stake to McKesson.
Franz Haniel & Cie, which also holds 19-per cent of giant German retailer Metro AG, said that its stake sale will generate almost €2 billion and would use it to further reduce debt.
California-based McKesson is offering to buy the remaining shares for €23 ($31.7) per share, a premium of about 43 per cent over the stock price since speculation began in June that McKesson is close to finalising a deal.
It will also make a public tender offer for the outstanding convertible bonds of Celesio by offering €53,117.78 for each of Celesio's outstanding convertible bonds due in 2014 and €120,798.32 that are due in 2018.
The deal is valued at $5.4 billion or $8.3 billion (€6.1 billion) including debt.
McKesson plans to fund part of the deal with cash, while the rest is through bridge financing.
Details of financing will depend on how many Celesio shares and convertible bonds are tendered, it said.
McKesson said that the combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector worldwide.
It expects to deliver value to customers through increased supply chain efficiency and enhanced global sourcing, global distribution and logistics capabilities that bring new value and services to manufacturing partners and an extensive distribution network on three continents.
The combined group is expected to have annual revenues in excess of $150 billion (€111 billion), approximately 81,500 employees worldwide and operations in more than 20 countries.
McKesson and Celesio deliver to approximately 120,000 pharmacies and hospitals in the US, Canada, Europe and Brazil, including more than 11,000 pharmacies that are either owned or are part of a strategic banner or franchise network.
McKesson expects annual synergies between $275 million and $325 million by the fourth year following the completion of the deal.
Founded in 1835 as a chemist and dye business, Celesio is one of the largest pharmaceutical wholesalers in Europe and operates several pharmacy chains within Europe.
It has 132 wholesale branches, supplies 65,000 pharmacies and hospitals every day with up to 130,000 pharmaceutical products. Its services benefit a patient pool of about 15 million per day.
The Stuttgart-based company has 38,000 employees in 14 countries, catering to around over 2 million customers at 2,200 pharmacies.
It reported revenues of €22.3 billion in 2012.
A completed deal would boost California-based McKesson's purchasing power in negotiations with global drug makers, and eclipse the $6.7 billion acquisition of a 45 per cent stake in UK drug wholesaler Alliance Boots in 2012 by US pharmacy chain Walgreen Co. (See: Walgreen to acquire 45 % in Alliance Boots for $6.7 billion)
McKesson has recently gone on an acquisition spree and its latest purchase was carried out in October 2012 when it acquired PSS World Medical Inc for approximately $2.1 billion.
McKesson provides vital medicines and supplies, and information technology solutions that enable the healthcare industry to provide patients better and safer care.
It operates in two primary business categories - distribution solutions and healthcare technology solutions.
The company is the largest pharmaceutical distributor in North America with about one-third market share. It supplies to over 40,000 US pharmacies from Wal-Mart to community pharmacies and hospitals.
McKesson is also one of the leading medical supply companies and distributes medical-surgical supplies and homecare supplies.
The company's healthcare technology solutions provide software and hardware eliminating the need for paper prescriptions and paper medical records.