McKesson (MCK) Becomes $150 Billion Powerhouse With Celesio Acquisition

NEW YORK (TheStreet) -- Pharmaceutical company McKesson Corporation (MCK) announced it will acquisition of German drug wholesaler and distributor Celesio AG before reporting second-quarter earnings. The transaction, consisting of a 50.01% stake, currently held by diversified holding company Franz Haniel & Cie, and public tender of remaining traded shares, will total $8.3 billion.

Combined, the group expects to generate annual revenues of $150 billion across operations spanning 20 countries. The San Francisco-based company said the business will become an international pharmaceutical distribution powerhouse, benefiting from supply chain efficiency and global sourcing.

"The combination of McKesson and Celesio will create a leading global healthcare services platform that will advance our customers' ability to deliver better, more efficient healthcare solutions," said CEO John H. Hammergren in a statement. "We will bring together the strengths and expertise of each company to address global healthcare challenges."

"This transaction is about growth," added Celesio CFO Marion Helmes. "This combination allows two market leaders with complementary geographic footprints to work together in an increasingly global market segment."

McKesson said both companies will maintain individual branding and utilize existing networks and distribution channels.

The acquisition news, combined with second-quarter earnings that beat expectations, sent shares 7% higher to $153.03 in pre-market trading.

For the second quarter ended Sep. 30, the company reported earnings of $2.27 a share on an 11% year-on-year revenue increase to $33 billion. Analysts surveyed by Yahoo! Finance estimated earnings of $2.04 a share on $32.08 billion.

McKesson expects adjusted earnings of between $8.40 and $8.70 a share for the full-year ending March 31. This estimation excludes acquisition expenses, inventory-related charges and litigation reserve adjustments.

TheStreet Ratings team rates McKesson Corp as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about its recommendation:

"We rate McKesson Corp (MCK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

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