On Friday, June 5, Cardinal Health, Inc. (NYSE/CAH) announced that it would acquire The Harvard Drug Group for $1.115 billion. (Source: Cardinal Health, June 5, 2015.) Cardinal Health is a healthcare services company specializing in the distribution of pharmaceuticals and medical products. It serves more than 60,000 locations. The company also manufactures medical and surgical products. Cardinal Health is headquartered in Dublin, Ohio. The Harvard Drug Group is a distributor of generic pharmaceuticals, over-the-counter medications, and related products. It serves institutional, retail, and alternate care customers. The company is currently owned by Court Square Capital Partners, a private equity firm. Last year, the Harvard Drug Group had revenue of around $450 million. Cardinal health would fund the $1.115 billion acquisition with existing cash and new debt. The transaction would include about 450 employees and two distribution facilities. Upon the announcement, shares of Cardinal Health dropped 1.5% at the market’s open, bouncing back to $87.43 at midday.
Acquisition Good for EPS
According to George Barrett, chairman and CEO of Cardinal Health, the acquisition is in line with the company’s goal of providing the most comprehensive line of products to the widest range of customers. “This acquisition enhances our ability to support retail and institutional customers and further utilizes Red Oak, our joint venture with CVS Health, to source generics.” Cardinal Health is expecting the deal to boost earnings per share (EPS) by more than $0.15 per share in fiscal 2016, and more than $0.20 per share in fiscal 2017. The deal would generate even greater growth in EPS in future years. Buying companies is not new to Cardinal Health. Last month, Johnson & Johnson (NYSE/JNJ) officially announced that it accepted Cardinal Health’s offer to acquire its heart-product business, Cordis, for $1.944 billion. That deal would be all cash and is expected to close by the end of this year.