Cardinal Health, a $91 billion health care services company, announced plans to acquire The Harvard Drug Group (THDG), a distributor of generic pharmaceuticals, over-the-counter medications and related products to retail, institutional and alternate care customers.
THDG is currently owned by Court Square Capital Partners. Cardinal Health will pay $1.115 billion using existing cash and new debt. The transaction is expected to close in the beginning of fiscal year 2016 subject to regulatory approvals and other customary closing conditions.
Assuming this timing, Cardinal Health expects accretion in non-GAAP diluted earnings per share (EPS) from continuing operations of greater than $0.15 per share in fiscal 2016, net of the $0.03 to $ 0.04 per share of interest expense for the related debt financing. Cardinal Health expects accretion in non-GAAP diluted EPS of more than $0.20 in fiscal 2017 and for accretion to be increasingly greater thereafter.
In addition to enhancing the company's generic pharmaceutical distribution business, the acquisition expands Cardinal Health's existing telesales programmes and capabilities; broadens the company's portfolio of over-the counter pharmaceutical products; and brings specialised packaging offerings to meet the needs of hospital systems and other institutions.
Headquartered in Livonia, Michigan, The Harvard Drug Group had revenues of approximately $450 million in 2014. There are 450 employees and two distribution facilities included in the transaction.
"The Harvard Drug Group aligns perfectly with our commitment to provide the most comprehensive line of pharmaceutical products for the broadest range of customers," said George Barrett, chairman and chief executive officer of Cardinal Health. "This acquisition enhances our ability to support retail and institutional customers and further utilises Red Oak, our joint venture with CVS Health to source generics."
As a result of this planned acquisition and the pending acquisition of Cordis, Cardinal Health is providing its preliminary expectations for fiscal 2016 non-GAAP diluted EPS from continuing operations of $4.75 to $5.05. This range is based on the assumptions that the THDG transaction closes in the first quarter of fiscal 2016 and that the previously announced Cordis acquisition closes in the United States and key non-US countries towards the end of calendar 2015. The company expects to issue $1.5 billion of new debt related to these two acquisitions.
The company plans to release fourth-quarter and full year fiscal 2015 financial results and fiscal year 2016 guidance on July 30, 2015 prior to the opening of trading on the New York Stock Exchange.
Cardinal Health presents non-GAAP diluted earnings per share from continuing operations on a forward-looking basis. The most directly comparable forward-looking GAAP measure is diluted earnings per share from continuing operations. Cardinal Health is unable to provide a quantitative reconciliation of this forward-looking non-GAAP measure to the most directly comparable forward-looking GAAP measure, because Cardinal Health cannot reliably forecast restructuring and employee severance, amortization and acquisition-related costs (which Cardinal Health expects to increase significantly as a result of pending acquisitions), impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net, and LIFO charges/(credits), which are difficult to predict and estimate.