Executives last week announced a deal in which the bankrupt drug-distribution business of FoxMeyer Health Corp. would be sold to rival McKesson Corp. in a transaction valued at $1.3 billion.
The federal bankruptcy code requires that open bidding take place before the deal is completed. Additionally, regulators must clear the acquisition of antitrust violations.
Under the agreement, McKesson would assume responsibility for FoxMeyer Drug Co.'s $775 million financing package with GE Capital Services. It also would take on $400 million in other liabilities, pay $80 million in cash and arrange for $30 million in financing.
The sale is expected to be completed in November.
Its consummation will come as a relief to hospitals, which feared the company could be dissolved through the bankruptcy.
FoxMeyer Drug, based in Carrollton, Texas, filed for bankruptcy protection in Delaware in late August (Sept. 2, p. 26). The fourth-largest drug distributor, it represents about 98% of FoxMeyer Health's total revenues of $5.5 billion. About one-third of its business comes from hospitals and other providers.
FoxMeyer Drug reported $1.2 billion in assets and $1 billion in liabilities as of June 30.
FoxMeyer Health isn't included in the bankruptcy filing or the proposed sale.
McKesson, which is based in San Francisco, is the largest U.S. drug distributor. Its healthcare services division earned an operating profit of $206 million on revenues of $12.7 billion in the year ended March 31.
The transaction depends on FoxMeyer Drug meeting targets for sales, collections and financial performance. Creditors also must agree to honor certain claims.
The deal could prove personally profitable for Robert Peiser, who was hired as head of FoxMeyer Drug to handle its bankruptcy. Under the purchase agreement, Peiser would receive $2 million if the sale to McKesson is completed before next August.