McKesson released its second-quarter earnings Thursday, reporting that revenues rose 11% to $33 billion in the second quarter of this year, compared to $29.8 billion at this time last year.
Celesio's operations are expected to be integrated into McKesson's distribution business, which reported 11% growth in the second quarter as a result of “strong growth” in domestic drug distribution.
“Our customers—from community pharmacies to major hospital networks—will benefit from the increased scale, supply-chain expertise and sourcing capabilities of the combined company, together with enhanced access to innovative technology and business services,” John Hammergren, McKesson's chairman and CEO, said in a written statement.
Moody's Investors Service analysts said it would review the company's ratings for a downgrade based on the addition of Celesio's debt. But they also said the deal will boost McKesson's business outside of the U.S., diversify its revenue and profit streams, and may increase supply-chain efficiencies that could lead to hundreds of millions of dollars in savings.
“While the acquisition of Celesio will expand McKesson's scale and move it into new geographies, the company will take on increased regulatory and reimbursement risk,” Diana Lee, a Moody's analyst, said in a written statement. “In addition, although Celesio's retail pharmacies offer better margins than drug distribution, they operate in highly competitive markets and represent a new business line for McKesson.”
A Robert W. Baird & Co. analyst agreed, noting in a research note that the acquisition may present legal exposure and integration challenges, but described the deal as “highly accretive” and a “sweetener” to the company's second-quarter results.
McKesson plans to acquire Celesio from majority shareholder Franz Haniel & Cie. The boards at both companies have approved the share purchased agreement, McKesson said.
Other drug wholesalers are looking to diversify through acquisitions and partnerships. AmerisourceBergen said in March that it had signed a 10-year deal with Walgreen Co. to supply the pharmacy chain with brand-name, generic and specialty drugs. Walgreen recently purchased a 45% stake in Alliance Boots, another U.K.-based pharmacy chain. A McKesson spokesman said the company expects to complete the tender offers in the first quarter of next year and would take operational control of Celesio later in 2014.
(This story has been updated to correct that McKesson reported revenue of $33 billion.)
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