Submitted by Fox First at Ten on October 25th
NEW YORK (AP) - Prescription drug distributor McKesson Corp. is expanding its medical supplies business by buying PSS World Medical Inc. for about $1.46 billion.
McKesson said Thursday it will pay $29 per share for PSS World, a 34.3 percent premium over Wednesday's closing price. PSS World shares finished at $21.60 Wednesday and advanced $7.09, or 32.8 percent, to $28.69 in premarket trading.
San Francisco-based McKesson values the deal at $2.1 billion including PSS World's debt.
PSS World, of Jacksonville, Fla., had $2.1 billion in revenue in its latest fiscal year. It will become part of McKesson's medical-surgical business. The deal requires the approval of PSS World shareholders.
McKesson expects $100 million in annual savings in the fourth year after closing.
Gary Corless, the president and CEO of PSS World, will become McKesson's chief operating officer after the deal closes.
Shares of PSS World plunged 11.6 percent on May 10 after the company said it was changing its business strategy and would focus on its physician and laboratory service units. It said it would divest its special dental and skilled nursing divisions. The stock has not recovered most of its losses.
McKesson reported its fiscal second-quarter results Thursday. The company said its net income climbed 35 percent during the quarter, to $401 million, or $1.67 per share, from $296 million, or $1.18 per share. Excluding one-time costs McKesson said it earned $1.92 per share in the quarter ended Sept. 30. Revenue slipped 1 percent, to $29.85 billion from $30.22 billion, but the company set aside less money for litigation reserves.
Analysts expected McKesson to report net income of $1.77 per share and $30.89 billion in revenue, according to FactSet.
During the quarter McKesson added $44 million to its legal reserves to account for claims against the company in a lawsuit regarding drug prices. It set aside $118 million in the year-ago quarter.
McKesson said its distribution revenue fell 1 percent to $29.03 billion because greater sales of low-cost generic drugs. Revenue from its medical-surgical business was unchanged at $873 million. Revenue from its technology solutions business slipped to $824 million from $825 million.
For the full year McKesson now expects adjusted net income of $7.15 to $7.35 per share, up from its prior estimate of $7.05 to $7.35 per share.
Analysts expect the company to report net income of $7.27 per share on average.
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