Drug distribution company McKesson Corp. (MCK) is in advanced talks to acquire German peer Celesio AG (CAKFF.PK) for more than 3.74 billion euros, or $5.08 billion, the Wall Street Journal reported Tuesday, citing people familiar with the matter. Shares of Celesio are gaining more than 20 percent in Tuesday's regular trading session following the news.
According to the WSJ, San Francisco-based McKesson could make an offer to acquire Celesio for 22 euros per share, which represents a premium of about 29 percent over Celesio's closing stock price of 17.07 euros on Monday. McKesson would also reportedly assume Celesio's debt, putting the company's enterprise value that includes equity and debt, at around 5.38 billion euros.
McKesson has reportedly gained access to Celesio's books and may announce a bid as early as this month if it decides to go ahead. However, the company is still trying to resolve issues related to the exact price and financing arrangements. An acquisition of Celesio would boost McKesson's purchasing power in negotiations with global drug makers, according to the WSJ report.
The WSJ further reported that under a likely deal structure, McKesson would launch a voluntary takeover offer for all Celesio shares, with Celesio's majority shareholder Franz Haniel & Cie GmbH agreeing to tender its stake.
McKesson's talks with Celesio come after U.S. drugstore chain operator Walgreen Co. (WAG) acquired a 45 percent stake in European drug wholesaler Alliance Boots GmbH for $6.7 billion in 2012, with an option to buy the remaining stake later.
According to the WSJ report, other U.S. drug distributors like Cardinal Health Inc. (CAH) and CVS Caremark Corp. (CVS) have also engaged in talks with Celesio, but these talks have focused on strategic cooperation.
Founded in 1835, Celesio is based in Stuttgart, Germany, and supplies 65,000 pharmacies and hospitals each day with up to 130,000 pharmaceutical products. The company, one of Europe's three largest pharmaceutical wholesale distributors, employs 38,000 people and operates in 14 countries.
In 2012, Celesio reported revenues of more than 22 billion euros. The company serve over 2 million customers - at 2,200 pharmacies of its own and 4,100 participants in its brand partnership schemes.
In mid-August, Celesio reported a decline in adjusted profit for the first half of 2013 on lower sales and trimmed its fiscal 2013 earnings forecast. On a reported basis, however, the company posted a net profit attributable to shareholders of 85.4 million euros, compared to loss of 178.4 million euros in the year-ago period. First-half revenue declined 5 percent to 10.73 billion euros from 11.25 billion euros in the same period of the prior year.
At that time, Celesio forecast fiscal 2013 adjusted EBIT between 405 million euros and 425 million euros, owing to the continued discount competition in Germany and additional negative currency effects. The company's previous adjusted EBIT forecast for the year was in a range of 445 million euros to 475 million euros.
In Tuesday's regular trading session, MCK is trading at $134.70, up $5.07 or 3.91 percent on a volume of 2.78 million shares.
On Frankfurt's Xetra, Celesio shares are currently trading at 20.53 euros, up 3.46 euros or 20.27 percent on a volume of 6.20 million shares.
by RTT Staff Writer
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