Cardinal Health Inc To Acquire The Harvard Drug Group For $1.15 Billion

Cardinal Health Inc. (NYSE:CAH) has agreed to acquire drug distributor The Harvard Drug Group (THDG), which distributes over the counter (OTC) drugs, generic drugs, and other related products to retail, alternate care, and institutional customers.

Cardinal Health announced it is expected to pay a sum of $1.15 billion to Court Square Capital Partners, which currently owns THDG, in order to complete the acquisition. According to the announcement, Cardinal Health is expected to use its existing cash and new debt to finance the acquisition.

The companies expect to close the transaction during the beginning of fiscal year 2016, contingent upon a go ahead from regulatory authorities and other customary conditions. Assuming that there are no surprise hurdles and the companies manage to close the deal by the said time frame, the acquisition will prove to be accretive to Cardinal Health’s non-GAAP diluted earnings per share (EPS) of more than $0.15 per share in 2016; net of $0.03 to $0.04 per share of interest expense for the related debt financing.

The company also expects the deal to be accretive beyond 2016. Accretion of over $0.20 per share to the non-GAAP diluted EPS has been forecasted by the company; with expectations of an increased accretion thereafter.

The deal is expected to expand Cardinal Health’s business in generic drugs distribution, along with increasing its existing telesales programs, and capabilities. The acquisition deal is likely to expand Cardinal Health’s portfolio of OTC drugs, and give the company access to the specialized packaging offers, which are expected to help meet the demands of hospital systems and other related healthcare institutions.

THDG reported total revenues of around $450 million last year. The company provides employment to as many as 450 people, and has two distribution sites, which are expected to be transferred to Cardinal Health under the terms of the transaction.

Chief executive officer and chairman of Cardinal Health, George Barrett, said in the press release: “The Harvard Drug Group aligns perfectly with our commitment, to provide the most comprehensive line of pharmaceutical products for the broadest range of customers.” He further added: “This acquisition enhances our ability to support retail and institutional customers, and further utilizes Red Oak; our joint venture with CVS Health to source generics.”

2016 Guidance
Cardinal Health also provided guidance for fiscal year 2016, after announcing the acquisition plans for THGD, and the pending acquisition for Cordis Corp, a subsidiary of Johnson & Johnson (NYSE:JNJ).

Based on the said acquisition, Cardinal Health expects to report non-GAAP diluted EPS from continuing operations in the range of $4.75 and $5.05. The guidance is based on the assumption that the THGD deal is likely to close during the first quarter of 2016, and the Cordis deal will be closed by the end of 2016.

The company announced that it expects to discuss its detailed financial outlook for fiscal year 2016 during its earnings call for 4QFY15, scheduled to be held July 30.

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