McKesson Corp. has reached a definitive agreement to buy General Medical, a privately held medical-surgical supplier based in Richmond, Va.
The combination would create the country's largest healthcare supply firm, the companies said, and would position McKesson as a potential one-stop supply center for integrated healthcare networks.
Through the purchase, McKesson, primarily a wholesale drug distributor to hospitals and retail pharmacies, would gain a beachhead in the rapidly growing market of nonhospital sites such as physician offices and clinics. General Medical has a leading position in that niche.
In the hospital medical-surgical segment, General Medical ranks third behind Allegiance Corp., McGaw Park, Ill., and Owens and Minor, Richmond, Va.
"Strategically, it's a prudent move," said Lawrence Marsh, an industry analyst at Salomon Brothers. "This etches away at the lingering doubt that things are going to happen at McKesson."
McKesson's management has said it would shed nonhealthcare units while acquiring healthcare companies, such as the recently completed purchase of bankrupt drug distributor FoxMeyer Drug Co.
In agreeing to the deal, General Medical executives abandoned a plan to take the company public. San Francisco-based McKesson will pay about $775 million for General Medical. The price includes $347 million for equity, purchased with an even split of stock and cash. McKesson also would assume $428 million in General Medical debt.
The deal is expected to close within two months, subject to regulatory review. General Medical had $1.7 billion in 1996 revenues. McKesson reported revenues of $8.9 billion for the nine months ended Dec. 31.