McKesson to acquire Celesio AG for approximately $8.3 billion

McKesson will acquire majority stake in the company for approximately $31 per share

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SAN FRANCISCO—McKesson Corporation and Celesio AG have announced the signing of an agreement by which McKesson will acquire a majority stake in Celesio for 23 euros (approximately $31.78) per share and launch parallel voluntary public tender offers for Celesio’s remaining publicly traded shares and outstanding convertible bonds. The offer price represents a 39-percent premium over the three-month volume weighted average price prior to Oct. 8, when market speculation of a transaction began. All told, the total transaction, which includes the assumption of Celesio’s outstanding debt, has an approximate value of 6.1 billion euros (approximately $8.3 billion).
Per the terms of a share purchase agreement between McKesson and Franz Haniel & Cie. GmbH, Celesio’s majority shareholder, McKesson has agreed to acquire Haniel’s stake in Celesio, which represents 50.01 percent of the company’s total outstanding shares. McKesson has also established a business combination agreement with Celesio outlining the main factors to facilitate the combination of the companies. McKesson expects the tender offers to begin in the third quarter of its fiscal 2014 year, ending Dec. 21, 2013, and end during the fourth quarter of its fiscal 2014 year, but no earlier than Jan. 17, 2014.
The share purchase from Haniel and tender offers are subject to certain closing conditions.
“We are looking forward to welcoming the management team and employees of Celesio,” Paul C. Julian, McKesson’s executive vice president and group president, said in a press release. “McKesson and Celesio share a culture of respect for our customers and for the employees who serve them every day. The business leaders in McKesson and Celesio have built relationships with customers over many years and have a deep understanding of their own unique markets. We look forward to supporting Celesio and their business leaders as they implement their currently planned strategy for growth, and ultimately aligning our organizations more closely in the areas where we can deliver further value for our customers and manufacturing partners.”
The combined organization will be one of the world’s largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector. Once the transaction is complete, both organizations expect to maintain their own brands and continue serving customers through established channels. Celesio’s operations will be part of McKesson’s Distribution Solutions segment. The combined company is expected to realize annual revenues of more than $150 billion, with roughly 81,500 employees worldwide and operations in more than 20 countries.
“The agreements announced today with McKesson represent an exciting new chapter for Celesio,” said Marion Helmes, speaker of the Celesio AG management board and chief financial officer. “This transaction is about growth, it positions our operations for success and brings benefits for all Celesio stakeholders.  This combination allows two market leaders with complementary geographic footprints to work together in an increasingly global market segment.”
McKesson expects to see annual synergies of between $275 million and $325 million by the fourth year after it completes the necessary steps to obtain operational control of Celesio. In the first 12 months after successful completion of the tender offers, McKesson expects the transaction to be accretive to adjusted earnings per share by $1 to $1.20, assuming the company obtains 100-percent ownership of Celesio’s shares at the end of the offers.
“We are looking forward to working with Celesio's management team and employees to provide our customers with more efficient delivery of healthcare products and services around the world,” John H. Hammergren, chairman and CEO of McKesson Corporation, commented in a statement. “Our customers—from community pharmacies to major hospital networks—will benefit from the increased scale, supply chain expertise and sourcing capabilities of the combined company, together with enhanced access to innovative technology and business services.”
SOURCE: McKesson press release

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