McKesson a Step Closer to PSS World - Analyst Blog
December 28 2012 - 5:40AM
Zacks
McKesson
Corporation (MCK) recently announced that it has received
a notification of early termination of the waiting period under the
Hart-Scott Rodino Antitrust Improvements Act of 1976, in relation
with its proposed acquisition of PSS World Medical
Inc. (PSSI).
On October 25, 2012, McKesson had
announced the signing of a definitive agreement with PSS World
Medical Inc., whereby the former will acquire all outstanding
shares of PSS World Medical for $29.00 per share in cash.
The termination of this waiting
period brings McKesson a step closer to completing its acquisition
of PSS World Medical.
Including PSS World Medical's debt
of about $480 million and related transaction costs, the
acquisition was valued at approximately $2.1 billion. Once the
acquisition goes through, PSS World Medical will combine with
McKesson’s Medical Surgical Distribution business.
McKesson’s Medical Surgical
Distribution business provides medical-surgical supply
distribution, equipment, logistics and other services to healthcare
providers including physicians’ offices, surgery centers, extended
care facilities, homecare and occupational health sites through a
network of 28 distribution centerswithin the U.S.
The addition of PSS World Medical
to the company’s product line will amalgamate distribution
capabilities along with product and technology expertise of both
the businesses, thereby bolstering the Medical Surgical
Distribution business of McKesson, which accounted for a meagre 3%
of total sales in 2011.
At the time of announcing the
acquisition, McKesson had said that it expects to generate more
than $100 million in annual savings (pre-tax) by the fourth year
after the closure of the deal. On the second quarter 2013
conference call, the company stated that the deal is expected to
add 15 to 25 cents per share to the company's bottom line after a
year of closing.
We note that McKesson has been
quite active on the acquisition front to boost its organic growth.
Last month, the company inked a deal with Emendo Ltd. to acquire
the latter. Emendo has developed CapPlan, which is utilized in more
than 40 hospitals across New Zealand, Australia, Canada and the UK
to optimize operational efficiency by forecasting patient demand
and plan resourcing.
We currently have a Neutral
recommendation on McKesson. Our recommendation is supported by a
Zacks #3 Rank (Hold) in the short run.
MCKESSON CORP (MCK): Free Stock Analysis Report
PSS WORLD MED (PSSI): Free Stock Analysis Report
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