Lilly Buys McKesson's PCS Unit for $4 Billion

McKesson has agreed to sell its PCS prescription benefit management unit to Eli Lilly for $4 billion. PCS is the USA's largest provider of prescription benefit management services, and Britain's cash-rich but acquisition-shy Glaxo had been rumored to be seeking to buy this business (Marketletters passim).

Shareholders of McKesson will receive $76 per share in cash, totaling $3.4 billion, and one share of stock in a new McKesson for each share of McKesson they own, through a spin-off of the new McKesson shares to current owners. The new McKesson will use the balance of the amount to pay taxes and transaction costs and for general corporate purposes. The transaction, which has been approved by both companies' boards, subject to various conditions including provisions of the Hart-Scott Rodino Act, is expected to close in around 60 to 75 days.

Lilly's chairman, Randall Tobias, said the move will help Lilly along to its goal of becoming the global leader in helping consumers solve their health care problems. And the purchase will even the playing field as well as stabilizing an interesting market situation, Lilly says.