McKesson to buy UDG core biz for $467m
The proposed cash sale – which is awaiting shareholder approval – will divest UDG’s wholesale businesses and home therapy TCP Group, both based in the Republic of Ireland, as well as Northern Ireland’s United Drug Sangers, and vaccine advisory MASTA, part of UDG’s Ashfield division.
UDG will retain its Ashfield, Aquilant, and Sharp businesses.
UDG CEO Liam FitzGerald will step down in March 2016, to be replaced by current chief operating officer Brendan McAtamney (pictured).
‘Pressure’ in ROI
Liam Fitzgerald told investors the divestiture “will allow these businesses to prosper under McKesson’s leadership.” He said United Drug’s subsidiaries in Ireland “have been pressurised in recent years, despite their market share,” adding “greater scale is required in these businesses to achieve greater efficiencies.”
Fitzgerald said the transaction comes after a decade of “repositioning away from our legacy” and “marks just about the perfect time for me to pass the baton on to Brendan.”
Continuing company: M&A and restructure
UDG’s management stressed that cash from the deal will go towards more acquisitions.
“UDG has successfully transitioned from a Republic of Ireland, distribution-based company to an internationally-focused services company,” after a series of M&A, said future CEO Brendan McAtamney.
In recent years UDG acquired US packaging company Sharp Clinical Services, contract sales and nurse advisory firm Pharmexx, and healthcare comms business KnowledgePoint360.
McAtamney said the divestiture will leave UDG Healthcare with higher growth and better margins for its remaining four businesses: Ashfield Healthcare Communications, Ashfield Commercial, Sharp Pharmaceutical Packaging, and Aquilant Specialist Services.
The company will restructure its operations to focus on outsourcing requests from the US, Japan and Europe.
Forecasts for increased numbers of pharmaceutical approvals will lead to greater demand for pre- and post-launch services, McAtamney added, especially surrounding new mechanisms and orphan disease treatments.
Many customers of the Ashfield divisions are small biotech companies “very, very comfortable with the outsourcing paradigm,” he added.
Financials
Following the restructure, UDG expects its blended sterling and euro tax rate to increase by 1-2%, CFO Alan Ralph told investors. The company is considering changing its reporting currency in future.
The company is not changing its 2015 earnings guidance, and Ralph said he expected 2016 dividends to be higher than in 2015.
Shareholders will vote on the transaction at UDG’s AGM on October 13, and approval from EU competition authorities is expected in March 2016.
For more financial details, read UCB's investor slideshow below.
