McKesson, the largest drug wholesaler in the U.S., is betting $8.3 billion on becoming a similar force in Europe. It will try to secure leverage in drug purchases with the buyout of Celesio, a Germany-based drug wholesaler with operations in 16 European and emerging markets, as it follows competitor AmeriSource Bergen's move on the continent earlier this year.
"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," McKesson CEO John Hammergren said in announcing the deal.
McKesson is offering €23 per share, or about $5.4 billion, for the company's stock. The remainder of the value of the deal is in assumed debt. It already has a deal to buy about 50% of the company's shares from a single shareholder and is making a tender offer for the rest. The companies said finalization is dependent on McKesson snagging at least 75% of Celesio's shares.
The deal is all about getting better position and pricing power as the industry continues to globalize. That was a big motivation for Walgreen's decision last year to pay $6.7 billion for a 45% stake in Alliance Boots, with an option to buy the rest of the wholesaler and retailer. The company said the merger would save it $1 billion by 2016. It then turned around and struck a deal to invest in AmerisourceBergen and give it some of its distribution business in the U.S. and Europe.
The difference in the two deals is that Celesio has been been struggling to make money as the U.K. and European governments steadily squeezed drugmakers on prices to reduce their healthcare spending. On the other hand, Alliance Boots, which has drugstores and a wholesale business, is considered the "gold standard in the industry," Oliver Reinberg, an analyst at Kepler Cheuvreux, tells Bloomberg.
McKesson said combined, the companies will have more than $150 billion (€111 billion) in annual revenue, about 81,500 employees, and operations in more than 20 countries. It will deliver drugs daily in Europe, the U.S., Canada and Brazil.
- heres' the announcement
- more from Bloomberg