McKesson Reaches Deals For 75% Stake In Celesio

(RTTNews) - U.S. drug distributor McKesson Corp. (MCK) said Thursday that it has secured the acquisition of German peer Celesio AG (CAKFF) through two two new agreements with Celesio's largest shareholders. Following the close of these deals, McKesson will exceed 75 percent ownership of Celesio on a fully diluted basis.

The company had said last week that it was unsuccessful in reaching the 75 percent tender completion threshold to acquire Celesio.

McKesson has now reached a deal with Celesio's majority shareholder Franz Haniel & Cie GmbH to acquire its entire stake of Celesio shares for 23.50 euros per share, the same price as its previous offer. The company also signed a separate deal with an affiliate of activist investor Elliott Management to acquire Celesio convertible bonds.

The company noted that the two agreements are not subject to any closing conditions and the transactions are expected to close within ten business days.

McKesson said it plans to launch a voluntary tender offer to the remaining minority holders of Celesio common shares. The offer is expected to commence shortly after the close of the transactions.

John Hammergren, chairman and chief executive officer of McKesson Corp. said, "We are excited to move forward with our acquisition of Celesio. 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 healthcare products and services around the world."

San Francisco-based McKesson, a Fortune 500 company, agreed to acquire Celesio in late October 2013 in a deal valued at about $8.3 billion, including debt. The deal is expected to help boost McKesson's share of the generic drug market globally.

Stuttgart, Germany-based Celesio is a wholesale and retail company and provides logistics and services to the pharmaceutical and healthcare sectors. It supplies 65,000 pharmacies and hospitals each day with up to 130,000 pharmaceutical products. The company, one of Europe's three largest pharmaceutical wholesale distributors, employs 38,000 people and operates in 14 countries.

McKesson's talks with Celesio come after U.S. drugstore chain operator Walgreen Co. (WAG) acquired a 45 percent stake in European drug wholesaler Alliance Boots GmbH for $6.7 billion in 2012, with an option to buy the remaining stake later.

McKesson said that the company and its wholly-owned indirect subsidiary Dragonfly GmbH & Co KGaA have informed Celesio of their intention to enter into a domination and profit and loss transfer agreement, with Dragonfly as the dominating party.

McKesson expects to fund a part of the acquisitions with cash and has a temporary bridge loan in place to fund the balance of the acquisition price. The company expects permanent financing to be put in place following the close of the two transactions with Franz Haniel & Cie as well as Elliott Management.

McKesson will consolidate the financial results of Celesio during its fiscal fourth quarter ending March 31, 2014, and its earnings will reflect its proportionate share of Celesio's earnings.

McKesson expects the transaction to add $1.00 to $1.20 to its adjusted earnings per share on a fully diluted basis in the first twelve months following the close of the transactions, assuming the company's 100 percent ownership in the outstanding common shares of Celesio.

McKesson expects to realize annual synergies between $275 million and $325 million by the fourth year following the acquisition.

MCK closed Thursday's regular trading session at $172.37, up $2.69 or 1.59 percent on a volume of 3.47 million shares. In after-hours, the stock further gained $5.43 or 3.15 percent to $177.80.

Shares of Celesio closed Thursday's trading on Frankfurt's Xetra at 24.01 euros, up 1.03 euros or 4.48 percent on a volume of 1.56 million shares.