Tuesday 14 January 2014

McKesson says Celesio takeover offer has failed

Last night’s news by McKesson that their 3 month offer to purchase Celesio had failed to secure the 75% of the shares they deemed necessary to complete the purchase raises several issues for suppliers, retailers and wholesalers…

Apart from the disruption and uncertainty of the past three months and its impact on staff, possibly resulting in some of the good guys leaving, and key suppliers reverting to short term strategic mode, Celesio’s profile as a takeover prospect has invariable attracted the attention of other players such as McKesson’s closest U.S. rivals AmerisourceBergen and Cardinal Health, which between them account for 95% of the U.S. market, are, like McKesson, all looking to grow abroad to gain purchasing power with drug makers.
At a market capitalisation of €4.11bn, Celesio is within the reach of each of the companies.

Celesio Chief Executive Marion Helmes has said that an alliance or tie-up with a U.S. partner could help win steeper discounts, mainly for the generic drugs it buys but also for non-prescription medication and skin care products.

Celesio, owner of Britain's Lloyds pharmacy chain, is suffering from a price war that has all but erased its profits from the crowded German drugs wholesale market. Healthcare budget cuts across Europe, its main market, add to its woes.

In response, CEO Helmes is centralising procurement to cut costs, as well as widening and standardising the offering of its pharmacies across Europe under the Lloyds brand.

The mooted offer would value Celesio including its debt at close to 9.9 times expected earnings before interest, taxes, depreciation and amortisation (EBITDA) for this year, roughly in line with the 9.8 multiple its U.S. suitor is trading at. That compares with a multiple of about 11 times EBIDTA that U.S. drugstore chain Walgreens paid for a stake in Alliance Boots last year.

And speaking of which, Celesio wholesaling would add to the combined muscle of Walgreen and Alliance Boots, thereby frustrating the obvious appeal to A.S. Watson in completing a global structure that might help it keep pace with Walgreen Boots globally…

Meanwhile, back to the short term initiatives for NAMs…

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