US drug distributor McKesson to take over German rival Celesio, deal valued at $8.3 billion

BERLIN – U.S. pharmaceutical distributor McKesson Corp. has launched an $8.3 billion takeover offer for German competitor Celesio AG.

McKesson signed an agreement Thursday with German company Haniel to acquire its 50.01 per cent stake in Celesio and is making an offer to other shareholders at 23 euros a share. The offer represents a 5.8 per cent premium to Celesio’s closing share price on Wednesday.

San Francisco-based McKesson is also assuming Celesio’s outstanding debt, lifting the value of the deal up to $8.3 billion. Celesio’s management has welcomed the offer.

McKesson supplies medicines to half of U.S. hospitals, as well as doctors and health plans. It has more than 37,000 employees and reported revenue of $122.7 billion last year.

Stuttgart-based Celesio has about 38,000 employees, operates in 14 countries, runs 2,200 pharmacies and posted revenue of 22.3 billion euros (about $29.5 billion) in 2012.

The two companies plan to maintain their own brands after the deal is completed, McKesson said.

McKesson shares rose $7, or 4.9 per cent, to $150.05 in morning trading in the U.S. Earlier the stock reached an all-time high of $155. Celesio shares gained 5.5 per cent at 22.91 euros in Frankfurt.

Fitch Ratings said it will review McKesson’s ratings for a possible downgrade. Fitch has an ‘A-‘ rating on McKesson’s credit. That rating is investment grade and four notches above “junk” status.

“The proposed Celesio deal is strategically sound, but its funding is likely to significantly increase McKesson’s debt load,” Fitch said. The firm said McKesson has a lot of leverage considering its current rating.

McKesson also reported its fiscal second-quarter results on Thursday. The company said its net income rose 1 per cent, to $404 million, or $1.74 per share, from $401 million, or $1.67 per share. Excluding one-time charges, McKesson said it earned $2.27 per share. Revenue grew 11 per cent, to $32.95 billion from $29.78 billion.

Analysts expected McKesson to report net income of $2.04 per share and $32.14 billion in revenue, according to FactSet. The company’s second quarter ended Sept. 30.

The company said it now expects adjusted net income of $8.40 to $8.70 per share in fiscal 2014, up from its previous estimate of $8.05 to $8.35 per share.

Analysts had forecast $8.32 per share on average.