(Reuters) - Cardinal Health Inc (CAH.N) said it would buy privately held drug distributor Harvard Drug Group for $1.12 billion to boost volumes of its generic distribution business.
The deal comes in the wake of drugstore CVS Health Corp’s (CVS.N) offer to buy specialty drug supplier Omnicare Inc OCR.N to expand its ability to distribute drugs to senior care service providers.
The Livonia, Michigan-based Harvard Drug Group, a distributor of generic and over-the-counter drugs, had revenue of about $450 million in 2014, Cardinal Health said.
“(The deal) adds additional generic volume that Cardinal can leverage by running through its distribution channel and Red Oak venture, and in the process, probably make it quite a bit more profitable,” William Blair analyst John Kreger said.
The deal will also expand Cardinal’s telemarketing division.
Cardinal Health, the second-largest U.S. drug distributor by revenue, said it expects the deal to add more than 15 cents per share to adjusted earnings from continuing operations in 2016 and 17 cents per share in 2017.
Cardinal Health agreed in March to buy Johnson & Johnson’s (JNJ.N) cardiology and endovascular products unit Cordis for $1.9 billion.
The company will fund the deal with existing cash and new debt. It expects to issue $1.5 billion of new debt related to these two acquisitions.
The deal is expected to close in the beginning of fiscal year 2016.
Cardinal Health said it expects 2016 adjusted earnings from continuing operations to be $4.75-$5.05 per share, largely above the average analyst expectation of $4.89 according to Thomson Reuters I/B/E/S.
Jones Day was Cardinal Health’s legal adviser on the deal.
Reporting by Amrutha Penumudi in Bengaluru; Editing by Saumyadeb Chakrabarty and Don Sebastian