McKesson recalibrates its EU strategy after Celesio deal nosedives

McKesson ($MCK), the largest U.S. wholesale distributor of drugs, decided it needed an EU strategy after competitor AmerisourceBergen ($ABC) made its own deal there last year. So it made an $8.3 billion bid for German wholesaler Celesio. But with its failure Monday to close the Celesio deal, the San Francisco-based company finds itself again figuring out how to establish a beachhead on the continent.

"Clearly a joint venture would be an alternative," CEO John Hammergren told Bloomberg at the JPMorgan Healthcare Conference where the company was presenting Monday. "We have been talking to Celesio for some time about various alternatives."

McKesson failed to get the required 75% of shares tendered, even after raising its bid last week to €23.50 ($31.96) per share from the €23 it initially offered. The price punch was needed to get buy-in from Elliott Management, a hedge fund and large shareholder that opposed the initial offer. German rules prevented the company from just extending the offer, McKesson told Bloomberg. Hammergren said McKesson might try to resurrect it, if it can do so at the same price.

With Celesio, McKesson would have gotten an EU wholesaler with 132 facilities that supplied 65,000 pharmacies and hospitals, concentrated in 14 countries. It also has a foothold in Brazil. Celesio's largest shareholder, Franz Haniel & Cie, is faced with debt issues and was anxious for a sale.

AmerisourceBergen made a move on the continent last year in a three-way tie-up with Walgreen ($WAG) and European wholesaler and retailer Alliance Boots. Alliance Boots has both wholesale and drugstore operations and is seen as a leader in the EU. Getting a presence in Europe is seen by analysts as a way for wholesalers to improve their leverage in price negotiations with drugmakers as the industry continues to globalize.

- read the Bloomberg story