Cardinal Gets Antitrust Clearance - Analyst Blog

Cardinal Health (CAH) recently announced that antitrust regulators had cleared its $1.3 billion takeover of Kinray, a leading pharma distributor with a presence in the New York metropolitan area. In this regard, the Federal Trade Commission (“FTC”) had approved early termination of waiting period, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, for the planned takeover.     

The cash deal to acquire Kinray will enhance Cardinal's capability to cater to retail independent pharmacies in the northeastern U.S. markets. Cardinal expects to shortly close the deal.

The company earlier anticipated that the transaction will be neutral to slightly accretive to its fiscal 2011 adjusted earnings, contingent upon the time of the deal closure. Cardinal projects accretion of not less than 12 cents in adjusted earning per share from continuing operations in fiscal 2012, after taking into account the effect of amortization of intangibles.  

Kinray is one of the largest privately held distributors of generic, pharmaceutical and various home health care products. It had annual revenue of over $3.5 billion. The company serves over 2,000 independent retail pharmacy customers as a distributor of both generic and branded pharmaceutical products.

Cardinal Health continues to be one of the largest distributors of pharmaceuticals and medical supplies in the U.S. with a diversified product portfolio. The company offers a good example of how distributors are positioning themselves through acquisitions, divestments and internal development initiatives to increase their value proposition for providers.

The spinoff of CareFusion Corporation (CFN) has enabled the new Cardinal Health to focus on its core business. However, the company faces tough competition across all its business segments, which may pressure pricing and margins. Its competitors in the pharmaceutical supply chain segment include McKesson Corp. (MCK) and AmerisourceBergen Corp. (ABC). We currently have a Neutral recommendation on Cardinal Health.

 
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