Bouncing back after the rejection of its previous offer, McKesson Corp. has secured the acquisition of the Stuttgart, Germany-based pharmaceutical distribution firm Celesio Group.

McKesson, Celesio, pharmaceutical distribution, Franz Haniel & Cie, Elliott Management Corp., John Hammergren, health care products, McKesson-Celesio deal, drug chains, pharmaceutical distributors, global prescription drug channel, Walgreen, Alliance Boots, AmerisourceBergen, CVS Caremark, Cardinal Health, drug distributor, generic drug sourcing, pharmaceutical wholesalers

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On third try, McKesson finally pulls off Celesio deal

February 3rd, 2014

SAN FRANCISCO – Bouncing back after the rejection of its previous offer, McKesson Corp. has secured the acquisition of the Stuttgart, Germany-based pharmaceutical distribution firm Celesio Group.

McKesson reached an agreement with Franz Haniel & Cie, the majority shareholder, to acquire its entire holding of Celesio shares for €23.50 per share.

Separately, McKesson bought Celesio convertible bonds from the New York-based hedge fund Elliott Management Corp.

The two deals, which are not subject to any closing conditions, will give McKesson ownership of more than 75% of Celesio’s shares, which was the threshold needed to finalize the acquisition.

“We are excited to move forward with our acquisition of Celesio,” said McKesson chairman and chief executive officer, John Hammergren. “We look forward to bringing together the strengths of the McKesson and Celesio organizations so we can provide our customers with more efficient delivery of health care products and services around the world. Our customers 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.”

Celesio has 132 wholesale branches, from which it supplies 65,000 pharmacies and hospitals in 14 countries, mostly in Europe. The company also operates the Lloyds pharmacy chain.

McKesson’s successful bid to acquire Celesio was its third attempt, and it came just over a week after its most recent failed offer.

In October McKesson announced that it had acquired a controlling stake in Celesio and planned to launch a tender offer for the remaining shares. Elliott Management, which had assembled a 25% stake in Celesio, rejected that offer in December. McKesson last month raised its bid from €23 per share to €23.50 ($31.97), saying that was its last and best offer.
But McKesson failed to get the approval of the 75% of Celesio’s shareholders that it needed to finalize the deal.

The successful deal just over a week later called for the same price of €23.50 per share, plus an undisclosed amount for convertible bonds owned by Elliott Management.

A report in the Financial Times valued the McKesson-Celesio deal at $8.6 billion, including debt.

The acquisition is the latest in what a report by Fitch Ratings calls a series of “purchase power combination plays by drug chains and pharmaceutical distributors seeking to build scale in the global prescription drug channel.”

The report cites Walgreen Co.’s announcement in June 2012 that it would acquire a 45% equity interest in Alliance Boots, a global pharmaceutical, health and beauty retailer and wholesaler, for $6.7 billion in cash and stock. The two firms have formed a joint venture company, and in March 2013 they launched a long-term partnership with U.S. drug distributor AmerisourceBergen Corp.

More recently, CVS Caremark and Cardinal Health in December announced plans for a joint venture that they described as the largest generic drug sourcing entity in the United States. The venture is scheduled to be in operation as soon as July 1.

“The forms of these business combinations are diverse, both in their structure and progress,” the Fitch report said. “But each relationship makes sense for those involved, as scale increasingly matters in health care, particularly in the buying and selling of pharmaceuticals.”

McKesson has said that its deal to acquire Celesio will result in a combined company that will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the health care sector worldwide.