McKesson nails down another international supply chain deal

McKesson ($MCK) started its international expansion into drug wholesaling last year when it bought Germany-based Celesio. It then sealed a deal this summer in the U.K., and now it is extending its supply chain with another M&A move in the two Irelands.

The San Francisco-based health services provider says it is laying out €408 million ($466 million) in cash to buy the pharmaceutical distribution division of UDG Healthcare (UDG), whose United Drug Sangers operation is based in Northern Ireland and its United Drug operation is based in the Republic of Ireland. McKesson said in an announcement that it also gets TCP, a home healthcare provider in the Republic of Ireland, and MASTA, UDG's travel healthcare business based in the U.K. It picks up about 1,000 employees in the exchange.

McKesson execs said the deal was part of the company's growth strategy, while the CEO of UDG sounded relieved to unload its drug wholesaling operations. According to The Wall Street Journal, UDG Chief Executive Liam FitzGerald told reporters in a conference call that "The overall value of the pharmaceutical market in the Republic of Ireland has been in decline for a number of years; … consequently we are delighted that McKesson made an attractive offer for our business."

The operations will be overseen by Marc Owen, chairman of the management board at Celesio AG. McKesson bought Germany-based Celesio last year for about $5.4 billion. The acquisition was expected to boost McKesson's profit and give it added strength in buying generic drugs for distribution. Celesio had 132 wholesale branches supplying 65,000 pharmacies and hospitals in 14 European countries. In July, it added to its international footprint with an offer to buy the 281 pharmacies of U.K. supermarket retailer Sainsbury's. That deal, and the UDG deal, are slated to close in the first half of next year and should add 10 cents to 14 cents to its earnings next year, the company said.

While McKesson has said that its international pharmaceutical business is on track, revenues were $5.8 billion for the last quarter, down 17% on a reported basis and flat on a constant currency basis. Its total revenues for the first quarter were $47.5 billion, a 9% gain. The company also completed a $2.5 billion acquisition this year of the international animal health distribution company MWI Veterinary Supply, which supplies vet operations in both the U.S. and the U.K.

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