McKesson Corp. (MCK) recently announced that it has completed the acquisition of Drug Trading Company Limited for Canadian Dollar (CAD) $920 million. Drug Trading is an independent banner of Katz Group Canada Inc. and Medicine Shoppe Canada Inc. Katz Group operates an integrated retail pharmacy network in Canada.
McKesson plans to integrate Drug Trading Co. into its Canadian pharmaceutical distribution and services business.
In January this year, the company had first announced the acquisition and had mentioned that the takeover is not expected to impact FY12 earnings. However, McKesson had said that FY13 earnings would gain 10 – 20 cents from the deal.
McKesson has been pursuing acquisitions regularly to supplement organic growth. This is the second acquisition made by the company in 2012. In February 2012, McKesson took over peerVue Inc., which will help simplify the company’s diagnostic medical imaging workflow, expedite communications for improved quality and efficiency, and support customer efforts to improve patient safety. The acquisition will extend McKesson’s portfolio of enterprise imaging and information management systems.
Moreover, in July 2011, McKesson had acquired management solutions company, Portico Systems. This acquisition supported the company’s ability to help manage payers efficiently and effectively, as Portico’s technology enables health care organizations to design, build, service and provide value-based reimbursement to their complex provider networks. We believe that the integration of Portico’s technology with the company’s Technology portfolio will help McKesson achieve accountable, collaborative care along with reducing administrative costs.
Additionally, in March 2011, the company had acquired British IT company System C Healthcare. System C manufactures Medway software, which is used in several National Health Service and private hospitals in the UK. The software includes electronic medical records, patient management, departmental, business intelligence and online applications. We believe that this acquisition will help McKesson expand its presence in the UK.
Our View
We currently have a long-term Neutral recommendation on McKesson, which carries a Zacks #3 Rank (short-term Hold rating). We believe that the acquisition of Drug Trading Co. is in line with McKesson’s objective of expanding its business in Canada.
To read this article on Zacks.com click here.
Zacks Investment Research
