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Credit Suisse pegs Safeway takeover value at $45 per share or more

BY Michael Johnsen

NEW YORK — Safeway could fetch an asking price of more than $45 per share, estimated Credit Suisse in a research note issued Thursday. 

Shares of Safeway were up slightly by 15 cents to $35.73 in early morning trading.

Responding to a Reuters report on private equity firm Cerberus’ interest in the supermarket chain, Credit Suisse research analyst Ed Kelly suggested that a Cerberus-Safeway deal would be compelling for the following reasons: 

  • Significant strengthening of local market share. The combined company would be the No. 1 or No. 2 player in 80% of its top 25 markets;
  • Significant synergies totaling as much as $1 billion;
  • A more rational competitive environment;
  • Minimal risk of forced divestitures following the requisite review by the Federal Trade Commission; and
  • A built-in exit strategy — the combined entities would be the No. 2 supermarket in the industry, making for an attractive public offering down the road. 

Cerberus currently owns 1,069 supermarkets through the combination of the Albertson’s acquisition in 2006 and the Supervalu deal in January 2013. The combined entity would generate $58.6 billion in trailing twelve month sales, according to Credit Suisse estimates. Kroger would be No. 1 with $96.8 billion in sales, and Ahold No. 3 with $26.2 billion. 

"The combination would transform the combined company into a top 2 player in many markets, allow for better leverage of local infrastructure/marketing, improve vendor purchasing and meaningfully reduce corporate costs," Kelly wrote. "History suggests synergies on a transaction of this type could easily amount to 2.5% to 3% of acquired sales."

No matter the outcome of this reported interest, the supermarket industry is ripe for consolidation, Kelly noted. "Both strong, well-positioned players and the weaker companies appear more willing to address the issue of local market scale through acquisitions and divestitures," he said. "This trend should be fueled by the growing strength of industry winners like Kroger, more forward-thinking by underperformers like Safeway and private equity involvement."

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McKesson takes majority stake in German drug distributor Celesio

BY Michael Johnsen

SAN FRANCISCO — McKesson on Thursday confirmed its proposed acquisition of Celesio, a leading international wholesale and retail company and provider of logistics and services to the pharmaceutical and healthcare sectors, with an agreement to acquire a majority stake in Celesio for €23 per share (US$31.75 per share) and to launch parallel voluntary public tender offers for the remaining publicly traded shares and outstanding convertible bonds of Celesio.  

The move is largely seen as a response to the merger agreement between Walgreens and Alliance Boots, and that combination’s subsequent stake in AmerisourceBergen. "The world is more rapidly globalizing and consolidating," John Hammergren, McKesson chairman and CEO, told analysts Thursday morning. "And clearly, McKesson needs to continue to have a leadership role around the world," he said. "What we were primarily focused on were the global supply chain synergies as outlined in [our] announcement.

The offer price of €23 per share represents a 39% premium over the three-month volume weighted average price prior to the market speculation that began on Oct. 8, 2013. The total transaction, including the assumption of Celesio’s outstanding debt, is valued at approximately €6.1 billion ($8.3 billion). 

"The combination of McKesson and Celesio will create a leading global healthcare services platform that will advance our customers’ ability to deliver better, more efficient healthcare solutions," Hammergren said. "The healthcare industry is evolving rapidly, marked by convergence between segments and increased globalization.  With today’s announcement, we will bring together the strengths and expertise of each company to address global healthcare challenges." 

McKesson and Celesio will combine to form a global leader in healthcare services with deep expertise in delivering solutions to pharmacies, manufacturers and patients. The transaction brings together the strength of two leaders with complementary geographic footprints, shared values and a heritage of trusted healthcare services — through pharmaceutical wholesaling, community pharmacy care and information technology — dating back approximately 180 years. 

The combined company will be one of the largest pharmaceutical wholesalers and providers of logistics and services in the healthcare sector worldwide. 

Details of the transaction were posted on a website outlining the deal at GlobalHealthcareLeader.com.

After completion of the transaction, McKesson and Celesio expect to maintain their own brands and continue to support customers through existing channels. 

"The agreements announced today with McKesson represent an exciting new chapter for Celesio," said Marion Helmes, speaker of the Celesio AG management board and CFO. "This transaction is about growth, it positions our operations for success and brings benefits for all Celesio stakeholders. This combination allows two market leaders with complementary geographic footprints to work together in an increasingly global market segment."

The operations of Celesio will be part of McKesson’s Distribution Solutions segment, headed by Paul Julian, EVP and group president. The combined group is expected to have annual revenues in excess of $150 billion, approximately 81,500 employees worldwide and operations in more than 20 countries. McKesson and Celesio deliver to approximately 120,000 pharmacy and hospital locations on a daily basis in the United States, Canada, Europe and Brazil, including more than 11,000 pharmacies that are either owned or are part of a strategic banner or franchise network of community pharmacies.   

Under the terms of a share purchase agreement between McKesson and Franz Haniel & Cie. GmbH, the majority shareholder in Celesio, McKesson has agreed to acquire Haniel’s stake in Celesio, currently representing 50.01% of the total outstanding shares of the company. The share purchase agreement has been approved by McKesson’s board of directors and Haniel’s supervisory board.

McKesson also has entered into a business combination agreement with Celesio that outlines the key parameters that will facilitate the combination of both companies. The management board and the supervisory board of Celesio welcome the takeover offer and the members of the management board intend to accept the takeover offer for any Celesio shares held by them.

Upon the successful completion of the tender offers, McKesson will consolidate the financial results of Celesio, and McKesson’s earnings will reflect its proportionate share of Celesio’s earnings.  McKesson expects to complete the tender offers in fiscal fourth quarter 2014, ending March 31, 2014, and expects to complete the required steps to obtain operational control of Celesio during McKesson’s fiscal 2015.

By the fourth year following the completion of the required steps to obtain operational control of Celesio, McKesson expects to realize annual synergies between $275 million and $325 million.

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CVS Caremark receives PBM, DTM accreditation

BY Antoinette Alexander

WOONSOCKET, R.I. — CVS Caremark has been awarded Pharmacy Benefit Management and Drug Therapy Management accreditation from URAC, a Washington, D.C.-based healthcare accrediting organization that establishes quality standards for the healthcare industry, the pharmacy retailer has announced.

"CVS Caremark is pleased to receive these accreditations," stated Jon Roberts, president of CVS Caremark’s PBM business. "This provides further validation of the company’s ongoing focus and commitment to patient care, outstanding customer service and overall quality."

URAC’s PBM Accreditation standards cover the organization’s contract terms and pricing structures; ensure access to drugs and pharmacies; provide for drug utilization management, formulary management, patient safety and customer service; and create a process for PBM outcomes measurement and quality improvement. 

URAC’s DTM Accreditation standards cover the essential parts of a DTM business, including driving appropriate therapeutic outcomes for consumers and reducing adverse events; promoting rational, clinically appropriate, safe and cost-effective DTM through evidence-based medicine; encouraging communication about medication use; supporting population specification, consumer identification and recruitment; and creating a process for DTM outcomes measurement and quality improvement.

 

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