AmerisourceBergen storms into animal health with $2.5B purchase of MWI

Rapidly expanding drug wholesaler AmerisourceBergen ($ABC) said Monday it plans to acquire MWI Veterinary Supply ($MWIV) for $2.5 billion, or $190 a share--a rich 8% premium over its closing price Friday and 17% higher than MWI's average closing price over the last three months. The companies expect to close the deal during the March quarter.

Idaho-based MWI, which distributes drugs and equipment to veterinary clinics in the U.S. and U.K., saw its revenues skyrocket 27% in fiscal 2014 to nearly $3 billion. Its stock has jumped 24% in the last three months, despite the company's November prediction that sales growth in 2015 would not be nearly as hot as it was last year.

The two companies predict that they can achieve $50 million in cost synergies by the end of their third year together, driven primarily by AmerisourceBergen's scale and product sourcing abilities, according to a press release announcing the deal. The addition of MWI should boost AmerisourceBergen's earnings per share by 8 cents this year, they said.

MWI CEO Jim Cleary

MWI's board approved the deal unanimously. "Our first core value is customer service, and with AmerisourceBergen, I'm confident MWI will continue to lead our industry in delivering quality service and superior value for our customers and manufacturer partners," said MWI CEO Jim Cleary in the release.

The MWI deal is the latest in a string of acquisitions by AmerisourceBergen, which has spent the last few years expanding its distribution footprint worldwide and forming alliances with drugmakers so it can get better discounts. Last year, it formed a deal with Walgreens ($WAG) and Europe's Alliance Boots. It also expanded into South America by investing $110 million in a Brazilian distributor.

Now AmerisourceBergen is counting on animal health to boost its expansion efforts even more. "Animal health is a growing market in the U.S. and internationally, and is a logical extension of our pharmaceutical distribution and services businesses," said AmerisourceBergen's CEO Steven Collis in the release, adding that "AmerisourceBergen's knowledge of manufacturer and provider services, our global reach and partnership philosophy, combined with MWI's expertise in veterinary and agricultural markets," would create valuable synergies for launching new products.

Clearly investors agree. Shares of MWI rallied more than 8% in premarket trading Monday to $189.90, while AmerisourceBergen's stock edged up 2% to $94.15.

- here's the press release
- read more at The Wall Street Journal(sub. req.)