Deutsche Bank Reiterates Coverage on McKesson on Attractive Risk-Reward Profile

In a report published Thursday, Deutsche Bank analyst George Hill maintained a Buy rating on McKesson Corporation MCK, with a $181.00 price target, despite Elliot’s decision to not tender shares.

According to the report, “Elliott stated that its decision is binding, and the fund owns enough of the voting interest in Celesio to block the deal. We still assume the deal will close, albeit at a slightly higher total purchase price. We maintain our Buy rating on MCK shares on attractive risk reward profile.”

Some highlights from the report included:

-”We estimate the bid needed to close the deal could shave $0.15-$0.20 off of McKesson's fully consolidated near-term deal accretion estimates of $1.00-$1.25.”
-”We estimate that Elliott has more than $1B at risk in Celesio, and Celesio shares could fall >30% to ~€16 level where they traded before the acquisition announcement.”
-”The risk to our target price being achieved is if the company does not complete the Celesio deal and does not achieve the expected synergies from the Celesio deal, if the company gets less benefit from generic drug conversions than expected, and if the technology segment does not meet expectations.”

McKesson closed Tuesday at $161.12.