Wednesday, March 20, 2013

Walgreen to take stake in AmerisourceBergen, drops Cardinal

(Reuters) - Walgreen Co and partner Alliance Boots said on Tuesday they signed a 10-year deal with AmerisourceBergen and will take up to a 23 percent stake in the distribution company, ending Walgreen's current contract with Cardinal Health Inc.

The agreement with Walgreen, the largest U.S. drugstore chain, and Alliance Boots, the European health and beauty chain in which Walgreen has a 45 percent stake, will boost AmerisourceBergen's revenue by $28 billion and earnings by 20 cents per share in fiscal 2014.

Walgreen and Alliance Boots have the right to buy up to 23 percent of AmerisourceBergen as part of the deal, starting with a 7 percent stake on the open market. Amerisource granted Walgreen and Alliance Boots warrants exercisable for 16 percent equity in Amerisource.

AmerisourceBergen shares rose 6.6 percent in light premarket trading to $51.50. Shares in Cardinal Health, whose contract ends in August, fell 8 percent.

Cardinal Health said in a statement that it has been planning to mitigate the contract loss and is still targeting fiscal 2014 earnings from continuing operations at least similar to fiscal 2013's expected range of $3.42 to $3.50 per share. It said the contract expiration would not affect fiscal 2013 earnings.

Cardinal also has a contract with drugstore CVS Caremark Corp that expires this year.

Shares in Walgreen were up 1.3 percent at $43. The company on Tuesday separately reported better-than-expected second-quarter earnings helped by sales of generic prescription drugs.

Walgreen's deal to buy a stake of AmerisourceBergen comes at a time when the U.S. healthcare industry and the pharmaceutical sector are under price pressure from the government and consumers who want to cut their medical spending.

The contract with the biggest U.S. and European drug retailers, will give Amerisource a bigger global reach, and includes the distribution of branded, generic and specialty drugs to retail stores, mail order and specialty pharmacies.

Amerisource has a market capitalization of about $11 billion. If the pharmacy chains fully exercise their rights, they will together be the biggest shareholder in Amerisource, based on current shareholdings. They will hold up to two board seats at Amerisource.

Walgreen has a 45 percent stake in Alliance Boots and an option to acquire the remaining 55 percent by August 2015.

Amerisource said the deal, effective September 1, was expected to contribute about 20 cents in earnings per share in fiscal 2014 ending September.

But during a conference call the company also said it expected its profit margins to be pressured because of the deal.

Amerisource said it now expected earnings of $2.96 to $3.06 per share from continuing operations in fiscal 2013 ending September, down from its previous forecast of $3.06 to $3.16.

The company said it expects incremental brand revenue of at least $2 billion in September and raised its revenue growth forecast to 8-11 percent for the fiscal year.

It had previously forecast revenue growth of 6-9 percent. Amerisource had revenue of $79.49 billion in fiscal 2012.

Amerisource said it expects free cash flow for fiscal 2013 to decrease to $100-$200 million as it takes on the new business. The company previously expected cash flow of $750 million to $850 million.

(Reporting by Caroline Humer and Phil Wahba in New York and Siddharth Cavale, Vrinda Manocha and Esha Dey in Bangalore; Editing by Saumyadeb Chakrabarty and Chizu Nomiyama)

Source: http://news.yahoo.com/amerisource-signs-10-distribution-deal-walgreen-114802920--finance.html

mega millions numbers the fray seahawks new uniforms 2012 tornadoes in dallas anchorman 2 kentucky basketball oaksterdam

No comments:

Post a Comment