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McKesson (MCK) Closes Rexall Health Acquisition in Canada
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McKesson Corporation (MCK - Free Report) announced that it has completed the acquisition of Rexall Health for $2.1 billion (approximately $1.7 billion net of certain estimated purchase price adjustments, proceeds from store divestitures and tax benefits).
McKesson’s share price has grossly underperformed the Zacks classified Medical-Dental Supplies industry so far this year owing to the global focus on drug pricing issues. The stock has lost 28.3% so far this year, compared to a decline of 9.4% for the industry.
Coming back to the latest news, the transaction was completed following an agreement with the Competition Bureau of Canada.
Under the deal, McKesson has taken over approximately 470 retail pharmacies, and will divest stores in 26 local markets identified by the Competition Bureau of Canada during its review.
Concurrently, McKesson announced that Domenic Pilla has been appointed as the CEO of the company’s Canadian unit, effective Jan 3, 2017.
The Rexall Health buyout will allow McKesson to broaden its pharmaceutical offerings in Canada during a time when Canadians are increasingly turning to pharmacies for healthcare advice and services.
McKesson expects the acquisition to have no impact on the bottom line in fiscal 2017, as the additional earnings will be offset by an anticipated charge related to a fair value adjustment of acquired inventory. However, the company expects the acquisition to provide earnings accretion of 30 cents to 35 cents on a constant currency basis by the third year of its completion.
We note that McKesson has been pretty active on the acquisition front. The recent takeovers of Vantage Oncology Holdings, Biologics, Inc. and UDG Healthcare Plc have boosted its top line and offset the impact of customer losses.
On the flip side, the company has been facing challenges in the form of price deflation associated with brand to generic conversion. Moreover, the Distribution Solutions segment is experiencing customer consolidation.
Last week, McKesson and Change Healthcare Holdings, Inc. announced that the companies received notification that the Department of Justice has closed its review and terminated the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, in connection with the proposed creation of a new healthcare information technology company.
In Jun 2016, McKesson and Change Healthcare had announced the formation of a new healthcare information technology company, which will combine substantially all of Change Healthcare’s business and the majority of McKesson’s Technology Solutions. McKesson will own approximately 70% of the new company, while the remaining equity stake will be held by Change Healthcare stockholders, including Blackstone, and Hellman & Friedman.
Heska’s earnings estimates increased from $1.13 to $1.35 for 2016 and from $1.38 to $1.53 for 2017 over the last 60 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 301.64%. Its share price has increased 87.6% year to date.
Vanda’s loss estimates for 2016 narrowed from 62 cents to 45 cents, while its earnings estimates for 2017 decreased from 13 cents to 9 cents over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 56.65%. Its share price has surged almost 72.4% year to date.
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McKesson (MCK) Closes Rexall Health Acquisition in Canada
McKesson Corporation (MCK - Free Report) announced that it has completed the acquisition of Rexall Health for $2.1 billion (approximately $1.7 billion net of certain estimated purchase price adjustments, proceeds from store divestitures and tax benefits).
McKesson’s share price has grossly underperformed the Zacks classified Medical-Dental Supplies industry so far this year owing to the global focus on drug pricing issues. The stock has lost 28.3% so far this year, compared to a decline of 9.4% for the industry.
Coming back to the latest news, the transaction was completed following an agreement with the Competition Bureau of Canada.
Under the deal, McKesson has taken over approximately 470 retail pharmacies, and will divest stores in 26 local markets identified by the Competition Bureau of Canada during its review.
Concurrently, McKesson announced that Domenic Pilla has been appointed as the CEO of the company’s Canadian unit, effective Jan 3, 2017.
The Rexall Health buyout will allow McKesson to broaden its pharmaceutical offerings in Canada during a time when Canadians are increasingly turning to pharmacies for healthcare advice and services.
McKesson expects the acquisition to have no impact on the bottom line in fiscal 2017, as the additional earnings will be offset by an anticipated charge related to a fair value adjustment of acquired inventory. However, the company expects the acquisition to provide earnings accretion of 30 cents to 35 cents on a constant currency basis by the third year of its completion.
We note that McKesson has been pretty active on the acquisition front. The recent takeovers of Vantage Oncology Holdings, Biologics, Inc. and UDG Healthcare Plc have boosted its top line and offset the impact of customer losses.
On the flip side, the company has been facing challenges in the form of price deflation associated with brand to generic conversion. Moreover, the Distribution Solutions segment is experiencing customer consolidation.
Last week, McKesson and Change Healthcare Holdings, Inc. announced that the companies received notification that the Department of Justice has closed its review and terminated the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, in connection with the proposed creation of a new healthcare information technology company.
In Jun 2016, McKesson and Change Healthcare had announced the formation of a new healthcare information technology company, which will combine substantially all of Change Healthcare’s business and the majority of McKesson’s Technology Solutions. McKesson will own approximately 70% of the new company, while the remaining equity stake will be held by Change Healthcare stockholders, including Blackstone, and Hellman & Friedman.
MCKESSON CORP Price and Consensus
MCKESSON CORP Price and Consensus | MCKESSON CORP Quote
McKesson, which competes with other companies like AmerisourceBergen Corporation, currently carries a Zacks Rank #5 (Strong Sell).
Key Picks in the Sector
A couple of better-ranked stocks in the health care sector include Heska Corp. and Vanda Pharmaceuticals VNDA. Both of them sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Heska’s earnings estimates increased from $1.13 to $1.35 for 2016 and from $1.38 to $1.53 for 2017 over the last 60 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 301.64%. Its share price has increased 87.6% year to date.
Vanda’s loss estimates for 2016 narrowed from 62 cents to 45 cents, while its earnings estimates for 2017 decreased from 13 cents to 9 cents over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 56.65%. Its share price has surged almost 72.4% year to date.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>