Cardinal Health announced Friday that it will acquire the Harvard Drug Group, a fellow pharmaceutical distributor, for about $1.1 billion.
The Dublin, Ohio-based pharmaceutical and medical products distributor hopes the acquisition will strengthen its generic drug-distribution business and allow it to expand its telesales capabilities and its over-the-counter portfolio.
Harvard Drug Group also brings specialized packaging offerings to the table. Professional associations tout the blister packaging as improving efficiency and accuracy when administered.
Generics are an increasingly important business for Cardinal, which owns a generic drug-purchasing joint venture with CVS Health called Red Oak Sourcing. The 50-50 venture boosted strong profit and revenue numbers for Cardinal in the third quarter.
The Harvard deal is expected to close in the beginning of fiscal 2016, pending regulatory approvals and customary closing conditions. Cardinal raised its fiscal 2016 budget guidance to reflect the acquisition, predicting non-GAAP diluted earnings per share from continuing operations of greater than $0.15 per share, net of $0.03 to $0.04 per share in interest expense for debt financing related to the deal.
Further, Cardinal said it expects the deal to lead to accretion in non-GAAP diluted EPS of over $0.20 in fiscal 2017 and increasingly higher thereafter.
Harvard Drug Group is based in Livonia, Mich., and had revenues of $450 million in 2014. The acquisition includes 450 employees and two distribution facilities.
"The Harvard Drug Group aligns perfectly with our commitment to provide the most comprehensive line of pharmaceutical products for the broadest range of customers," George Barrett, chairman and CEO of Cardinal Health, said in a statement. "This acquisition enhances our ability to support retail and institutional customers and further utilizes Red Oak, our joint venture with CVS Health to source generics."
Barrett said during a conference call that the company will be integrated into Cardinal's existing pharmaceutical distribution business rather than being held as a subsidiary.
Cardinal bought Cordis, Johnson & Johnson's cardiology medical-device business, in March for nearly $2 billion in cash. That deal marked Cardinal's entrance into the interventional vascular technology market.
Cardinal expects to issue about $1.5 billion in new debt for the two deals.