Cardinal Health Inc., the second-largest U.S. drug distributor by revenue, said it agreed to buy closely held AssuraMed for $2.07 billion to add home delivery services of health-care products.
The price will be $1.94 billion once the present value of tax benefits is added, Dublin, Ohio-based Cardinal Health said in a statement today. The company plans to finance the deal with $1.3 billion in senior unsecured notes and the rest in cash.
AssuraMed, based in Twinsburg, Ohio, has about $1 billion in revenue and more than 1 million customers. With the purchase, Cardinal Health will start supplying 30,000 products in areas such as diabetes and wound care to patients in their homes, an important service as the elderly and chronically ill increasingly receive care there, according to the company.
“Strategically, it makes a lot of sense,” Thomas Gallucci, an analyst with Lazard Capital Markets, said in a telephone interview today. “They’ve been looking to grow their distribution scale outside of the hospital.”
Cardinal Health gained 1.2 percent to $46 at 4:03 p.m. New York time. The shares have increased 9.4 percent in the last 12 months.
The deal is expected to close by early April, and to add 2 to 3 cents a share to adjusted earnings in 2013, the company said. In 2014, the acquisition will add at least 18 cents a share, Cardinal Health said.
Cardinal Health is paying about two times revenue and about nine times 2014 earnings before interest, taxes, depreciation and amortization, assuming $50 million of “synergies,” said Ross Muken, an analyst with ISI Group. That’s about in-line with other deals in the industry, he wrote in a note to clients.
Cardinal Health has made seven takeovers of companies in the last five years, with an average disclosed size of $813.1 million and an average premium of 36 percent, according to data compiled by Bloomberg. AssuraMed is the largest, the data show.
“The timing seemed really right for us,” Cardinal Health Chief Executive Officer George Barrett said in an interview. “We have the capital, we see the trends accelerating. We have watched this industry over the last couple of years go through a maturation process in the home-health area.”
Cardinal Health was advised by Bank of America Corp. and Wachtell Lipton Rosen and Katz. AssuraMed shareholders Clayton, Dubilier & Rice and GS Capital Partners were advised by JPMorgan Chase & Co., Goldman Sachs Group Inc., and Debevoise & Plimpton LLP.
McKesson Corp., based in San Francisco, is the top drug distributor.