Acquisition of U.S.’s Largest Independent
Wholesaler Enhances & Expands Strategic Scale, Strengthens
Support to Community Pharmacy and Drives Long-Term, Durable
Value
AmerisourceBergen Corporation (NYSE:ABC) and H. D. Smith today
announced that the companies have signed a definitive agreement
under which AmerisourceBergen will purchase H. D. Smith, the
largest independent wholesaler in the U.S., for $815 million in
cash. AmerisourceBergen plans to fund the acquisition through the
issuance of new long-term debt. The acquisition is expected to be
slightly accretive to adjusted diluted earnings per share (EPS) in
fiscal year 2018, and to achieve full run-rate synergies and be
approximately $0.15 accretive to the Company’s adjusted EPS in
fiscal year 20201. This acquisition was not contemplated in the
previous guidance the Company provided for fiscal year 2018. Based
on the estimated contribution of this acquisition, the Company now
expects revenue growth to be in the range of 8 percent to 11
percent, adjusted operating income growth to be in the range of 4
percent to 7 percent and Pharmaceutical Distribution Services
segment operating income growth in the range of 4 percent to 7
percent. AmerisourceBergen is reaffirming the rest of its
previously announced fiscal 2018 financial guidance. The
transaction is subject to regulatory review and other closing
conditions and is expected to close in early calendar 2018.
“The acquisition of H. D. Smith – a best-in-class private
distributor with facilities across the country and a diversified
customer base – strengthens our core business and expands and
enhances our strategic scale in U.S. pharmaceutical distribution,”
said Steven H. Collis, Chairman, President and Chief Executive
Officer of AmerisourceBergen. “This acquisition also builds upon
our foundation and meaningfully expands our support for independent
community pharmacies. We remain committed to building our business
to meet the evolving needs of our customers, driving long-term
value for the healthcare system and delivering compelling returns
for our shareholders. Importantly, we are united in our
responsibility to create healthier futures.”
“H. D. Smith has always shared our passion for supporting its
customers – across community pharmacy, health systems, long-term
care and specialty distribution,” said Robert P. Mauch, Group
President, Pharmaceutical Distribution and Strategic Global
Sourcing at AmerisourceBergen. “The established legacy of H. D.
Smith in serving community pharmacies is strongly aligned with and
complements the services AmerisourceBergen provides through Good
Neighbor Pharmacy and Elevate Provider Network. Together, we will
continue to offer the differentiated support independent community
pharmacies need to thrive in an evolving healthcare marketplace. We
welcome the opportunity to provide valuable solutions, along with
our industry leading customer experience, to all of these
healthcare providers.”
Since 1954, H. D. Smith has built a reputation for excellence
and customer-focused healthcare distribution. The company is among
the largest national wholesalers and, with 10 distribution centers
across the U.S., it provides full-line distribution of brand,
generic and specialty drugs, as well as high-value services and
solutions for manufacturers and healthcare providers. H. D. Smith
customers include retail pharmacies, specialty pharmacies,
long-term care facilities, institutional / hospital systems and
independent physicians and clinics. H. D. Smith subsidiaries
Triplefin, a pharmaceutical brand support provider, and Arete
Pharmacy Network, a pharmacy services administrative organization,
are not included in this transaction.
“Our ultimate priority and commitment has been, and continues to
be, the needs of our customers and trading partners,” said Dale
Smith, Chairman and CEO, H. D. Smith Holding Company. “Working
toward a common goal, H. D. Smith associates have been committed to
providing the best customer experience with a focus on honesty and
integrity. We remain proud of our contributions to improve
healthcare across the country, and we are honored to have supported
the success of community healthcare providers and our manufacturer
partners. We believe AmerisourceBergen will continue the strong
foundation set by my father. In joining AmerisourceBergen, we are
confident our mission will continue, and remain a point of pride
for the H. D. Smith family and its enduring legacy.”
Citi acted as financial advisor, and Cravath, Swaine & Moore
LLP provided legal advice to AmerisourceBergen. Morgan Stanley
acted as financial advisor, and Schiff Hardin LLP provided legal
advice to H. D. Smith.
About AmerisourceBergen
AmerisourceBergen provides pharmaceutical products,
value-driving services and business solutions that improve access
to care. Tens of thousands of healthcare providers, veterinary
practices and livestock producers trust us as their partner in the
pharmaceutical supply chain. Global manufacturers depend on us for
services that drive commercial success for their products. Through
our daily work—and powered by our 20,000 associates—we are united
in our responsibility to create healthier
futures. AmerisourceBergen is ranked #11 on the Fortune
500, with more than $150 billion in annual revenue. The
company is headquartered in Valley Forge, Pa. and has a
presence in 50+ countries. Learn more at amerisourcebergen.com.
About H. D. Smith
H. D. Smith is the largest, privately held national wholesaler,
with a complete line of healthcare products and solutions to
improve patient care. The company creates value and an
extraordinary customer experience by impacting the healthcare
supply chain. Bridging the gap between manufacturer and patient, H.
D. Smith’s specialty solutions division offers a unique suite of
strategic programs for patient access on behalf of pharmaceutical
suppliers. Headquartered in Springfield, Illinois, H. D. Smith also
operates CompleteCare Pharmacy, Smith Medical Partners, Triplefin
and Valley Wholesale Drug.
AmerisourceBergen's Cautionary Note Regarding Forward-Looking
Statements
Certain of the statements contained in this press release are
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Words such as “expect,” “likely,” “outlook,”
“forecast,” “would,” “could,” “should,” “can,” “will,” “project,”
“intend,” “plan,” “continue,” “sustain,” “synergy,” “on track,”
“believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,”
“assume,” variations of such words, and similar expressions are
intended to identify such forward-looking statements. These
statements are based on management’s current expectations and are
subject to uncertainty and change in circumstances. These
statements are not guarantees of future performance and are based
on assumptions that could prove incorrect or could cause actual
results to vary materially from those indicated. Among the factors
that could cause actual results to differ materially from those
projected, anticipated, or implied are the following: unfavorable
trends in brand and generic pharmaceutical pricing, including in
rate or frequency of price inflation or deflation; competition and
industry consolidation of both customers and suppliers resulting in
increasing pressure to reduce prices for our products and services;
changes in pharmaceutical market growth rates; changes in the
United States healthcare and regulatory environment, including
changes that could impact prescription drug reimbursement under
Medicare and Medicaid; increasing governmental regulations
regarding the pharmaceutical supply channel and pharmaceutical
compounding; declining reimbursement rates for pharmaceuticals;
federal and state government enforcement initiatives to detect and
prevent suspicious orders of controlled substances and the
diversion of controlled substances; increased public concern over
the abuse of opioid medications; prosecution or suit by federal,
state and other governmental entities of alleged violations of laws
and regulations regarding controlled substances, and any related
disputes, including shareholder derivative lawsuits; increased
federal scrutiny and litigation, including qui tam litigation, for
alleged violations of laws and regulations governing the marketing,
sale, purchase and/or dispensing of pharmaceutical products or
services, and associated reserves and costs, including the reserve
recorded in connection with the proceedings with the United States
Attorney’s Office for the Eastern District of New York; material
adverse resolution of pending legal proceedings; the retention of
key customer or supplier relationships under less favorable
economics or the adverse resolution of any contract or other
dispute with customers or suppliers; changes to customer or
supplier payment terms; risks associated with the strategic,
long-term relationship between Walgreens Boots Alliance, Inc. and
the Company, including with respect to the pharmaceutical
distribution agreement and/or the global sourcing arrangement;
changes in tax laws or legislative initiatives that could adversely
affect the Company’s tax positions and/or the Company’s tax
liabilities or adverse resolution of challenges to the Company’s
tax positions; regulatory action in connection with the production,
labeling or packaging of products compounded by our compounded
sterile preparations (CSP) business; failure to realize the
expected benefits from our reorganization and other business
process initiatives; managing foreign expansion, including
non-compliance with the U.S. Foreign Corrupt Practices Act,
anti-bribery laws and economic sanctions and import laws and
regulations; declining economic conditions in the United States and
abroad; financial market volatility and disruption; substantial
defaults in payment, material reduction in purchases by or the
loss, bankruptcy or insolvency of a major customer; the loss,
bankruptcy or insolvency of a major supplier; changes to the
customer or supplier mix; malfunction, failure or breach of
sophisticated information systems to operate as designed; risks
generally associated with data privacy regulation and the
international transfer of personal data; natural disasters or other
unexpected events that affect the Company’s operations; the
impairment of goodwill or other intangible assets, resulting in a
charge to earnings; the acquisition of businesses that do not
perform as expected, or that are difficult to integrate or control,
including the integration of H. D. Smith and PharMEDium, or the
inability to capture all of the anticipated synergies related
thereto or to capture the anticipated synergies within the expected
time period; risks associated with uncertainties as to the timing
and completion of the acquisition of H. D. Smith, including
relating to the timing, receipt and terms and conditions of any
required governmental and regulatory approvals for the proposed
transaction that could reduce anticipated benefits or cause the
parties to abandon the transaction; the possibility that various
conditions to the consummation of the acquisition of H. D. Smith
may not be satisfied or waived; the effects of disruption from the
transactions on the respective businesses of the Company and H. D.
Smith and the fact that the announcement and pendency of the
transactions may make it more difficult to establish or maintain
relationships with employees, suppliers, customers and other
business partners; the disruption of the Company’s cash flow and
ability to return value to its stockholders in accordance with its
past practices; interest rate and foreign currency exchange rate
fluctuations; and other economic, business, competitive, legal,
tax, regulatory and/or operational factors affecting the Company’s
business generally. Certain additional factors that management
believes could cause actual outcomes and results to differ
materially from those described in forward-looking statements are
set forth (i) in Item 1A (Risk Factors) in the Company’s Annual
Report on Form 10-K for the fiscal year ended September 30, 2016
and elsewhere in that report and (ii) in other reports filed by the
Company pursuant to the Securities Exchange Act.
1 The Company does not provide forward-looking guidance on a
GAAP basis as certain financial information, the probable
significance of which cannot be determined, is not available and
cannot be reasonably estimated.
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AmerisourceBergenInvestors / Financial
Media:Keri P. MattoxVice President, Corporate &
Investor Relations610-576-7801kmattox@amerisourcebergen.comorBennett
S. MurphyDirector, Corporate & Investor
Relations610-727-3693bmurphy@amerisourcebergen.comorBusiness
/ Trade Media:Gabe WeissmanGroup Vice President,
Communications610-727-3696gweissman@amerisourcebergen.comorH.D.
SmithMedia:Sarah Kinkade, MBAPublic
Relations
Manager217-747-0672sarah.kinkade@hdsmith.comorInquiries
regarding Triplefin or AretePharmacy Network:Carolyn
WebbVice President of Strategic
Planning217-747-8125carolyn.webb@hdsmith.com
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