News + Font Resize -

AmerisourceBergen, Kindred to combine pharmacy businesses
Valley Forge, Pennsylvania | Tuesday, October 31, 2006, 08:00 Hrs  [IST]

AmerisourceBergen Corporation and Kindred Healthcare, Inc. announced that they have signed a definitive agreement to combine their respective institutional pharmacy businesses, PharMerica Long-Term Care (PharMerica LTC) and Kindred Pharmacy Services (KPS), into a new, independent, publicly traded company.

As previously announced in August 2006, the transaction is intended to be tax-free to shareholders of both AmerisourceBergen and Kindred, and the transaction is expected to be completed in the first calendar quarter of 2007, an AmerisourceBergen press release stated.

The new company will be the second largest in the institutional pharmacy services market with revenues of approximately $1.9 billion and a customer base of approximately 330,000 licensed beds in 41 states. Preliminary synergy cost savings from the combination continue to be estimated at approximately $30 million.

Paul J. Diaz, Kindred president and chief executive officer, said, "Completion of the definitive agreement is a major step in creating the new company and unlocking greater value for our shareholders. The new company will join two companies with shared values centred on customers, employees, and patients. Upon completion of this transaction, Kindred's assets and resources will be concentrated on its hospital, nursing centre and contract rehabilitation businesses."

"Signing the definitive agreement is the critical milestone in building this new company and opening up opportunities for shareholders, associates and customers," said R. David Yost, AmerisourceBergen chief executive officer. "We are taking the best of both organizations and building a strong national player in a growing market. With this transaction, AmerisourceBergen will be in a stronger position to focus on pharmaceutical distribution, specialty pharmaceutical distribution and related services, and other pharmaceutical supply channel services such as packaging."

The combination is intended to be a tax-free transaction which will result in AmerisourceBergen and Kindred shareholders each holding 50 per cent of the shares of the new company.

In connection with the transaction, PharMerica LTC and KPS will each make a one-time cash distribution, intended to be tax-free, of up to $150 million to their respective parent companies, subject to potential adjustments at the closing of the proposed transaction.

PharMerica LTC and KPS will fund the distribution by borrowing up to $150 million each for a total of $300 million of new debt. The new company will assume this debt as part of the proposed merger. This new debt would be the only long-term debt the new company assumes from the parent companies, leaving it with significant financial flexibility.

After the cash distribution, each of the institutional pharmacy businesses would be separately spun off to AmerisourceBergen and Kindred shareholders, to be followed immediately by a stock-for-stock merger which would result in AmerisourceBergen and Kindred shareholders each owning 50 per cent of the new company.

AmerisourceBergen currently provides pharmaceutical distribution to both KPS and PharMerica LTC and under the definitive agreement will continue to provide those services to the new company. Kindred will provide information systems support and some administrative support services to the new company for a period of time.

The parties continue to conduct a national search for a chief executive officer and chief financial officer to lead the new public company, and are exploring the appropriate location for the new company's corporate headquarters.

Deutsche Bank Securities is acting as financial adviser to AmerisourceBergen and Lehman Brothers is acting as Kindred's financial adviser.

Post Your Comment

 

Enquiry Form