McKesson & AmeriSource Merge In $2.25 Billion Deal

Two of the largest US drug distributors, McKesson Corp and AmeriSourceHealth, have announced plans to merge in a deal worth $2.25 billion. According to the terms of the agreement, McKesson will assume about $532 million in long-term debt from AmeriSource, whose shareholders will receive a fixed exchange ratio of 0.71 shares of McKesson common stock.

The combined company, to be based in San Francisco, will have annual sales of more than $26 billion and a retail network of more than 9,000 pharmacies. Mark Pulido, McKesson president, said that the merger would add to earnings from the start and predicted that synergies would contribute more than $1 per share to earnings, once completed. McKesson is issuing about 17.4 million new shares of common stock in the merger.

The news of the deal has been seen by analysts as a response to the planned merger of Cardinal Health and Bergen Brunswig (Marketletter September 1), which would have created the largest company in the pharmaceuticals distribution sector. Hemant Shah of analysts HKS & Co has said that if the deals go ahead, each company would control about 25% of the market.