McKesson To Buy Germany's Celesio - Quick Facts

(RTTNews) - The U.S. Drug distribution company McKesson Corp. (MCK) has agreed to acquire a major stake in German drug distributor Celesio AG (CAKFF.PK) for 23 euros per share and to launch parallel voluntary public tender offers for the remaining publicly-traded shares and outstanding convertible bonds of Celesio. The offer price represents a 39% premium over the 3-month volume weighted average price prior to the market speculation that began on October 8, 2013. The total transaction is worth nearly $8.3 billion, or 6.1 billion euros, including Celesio's outstanding debt assumption.

Following the transaction closure, McKesson and Celesio expects to maintain their own brands and continue to support customers through existing channels. Celesio's operations would become a part of McKesson's Distribution Solutions segment, led by Paul Julian, executive vice president and group president.

The combined group is anticipated to have annual revenues exceeding $150 billion, around 81,500 employees worldwide and operations in over 20 countries. McKesson and Celesio deliver to about 120,000 pharmacy and hospital locations on a daily basis in the U.S., Canada, Europe and Brazil, including more than 11,000 pharmacies that are either owned or are part of a strategic banner or franchise network of community pharmacies, the company said.

As part of a share purchase agreement between McKesson and Franz Haniel & Cie. GmbH, the majority shareholder in Celesio, McKesson would buy Haniel's interest in Celesio, now representing 50.01% of the company's total outstanding shares. In addition, McKesson entered into a business combination agreement with Celesio, outlining the key parameters that would facilitate the combination of companies and was approved by McKesson's board and Celesio's Supervisory Board.

Further, McKesson would launch parallel tender offers for Celesio's publicly-traded shares at 23 euros a share and its outstanding convertible bonds at a price corresponding to the value of the underlying shares implied by a 23 euros a share offer price, which equals 53,117.78 euros per bond for Celesio's convertible bond due 2014 and 120,798.32 euros per bond for Celesio's convertible bond due 2018. The tender offers are expected to begin in McKesson's fiscal third quarter 2014, ending December 31, 2013, and conclude in McKesson's fiscal fourth quarter of 2014, but not earlier than January 17, 2014.

After the completion of the tender offers, McKesson said it would consolidate the financial results of Celesio, and McKesson's earnings would reflect its proportionate share of Celesio's earnings. McKesson hopes to complete the tender offers in its fiscal fourth quarter of 2014, ending March 31, 2014, and expects to complete the required steps to obtain operational control of Celesio in McKesson's fiscal 2015.

By the fourth year, McKesson expects to realize annual synergies between $275 million and $325 million. Also, it expects the transaction to be $1.00 to $1.20 accretive to adjusted earnings per share in the first year following the tender offers completion. The estimated range of accretion assumes McKesson achieves 100% ownership of the shares of Celesio at the conclusion of the tender offers.