Cardinal Health is building its drug distribution portfolio with the acquisition of Kinray, Inc., a Whitestone, N.Y.-based privately held distributor of branded and generic medicines to more than 2,000 retail independent pharmacy customers.
The $1.3 billion cash deal, announced Thursday, is expected to boost Cardinal Health’s retail independent pharmacy base by 40 percent to about 7,000, officials said, and give the company a foothold in the lucrative New York City market. Company officials say the deal, expected to close early in 2011, will add about 12 cents to its non-GAAP earnings per share for continuing operations in 2012.
“Adding Kinray to the Cardinal Health Pharmaceutical Segment portfolio will enable us to build on our increasing presence in community pharmacy and accelerate our growth in this important channel,” Cardinal Health CEO George Barrett.
Kinray has annual revenue of more than $3.5 billion and operates primarily in the New York metropolitan area, according to officials. The company bills itself as “the largest privately held distributor of pharmaceutical, generic, health and beauty and home healthcare products in the world.”
Dublin, Ohio-based Cardinal Health has announced 15 pending or completed acquisitions in the past five years, officials said, with an average size of $1.04 billion and an average premium of 31 percent. In July, the company purchased Healthcare Solutions Holding, LLC, the parent company of several specialty pharmacy subsidiaries including P4 Pathways and P4 Healthcare, for $517 million.
According to Matthew Coffina, an analyst with Morningstar, Inc., the Kinray deal makes sense for Cardinal Health, which sees its self as a middleman between pharmacies and drug companies.
“Larger customers have bargaining power over Cardinal and have the scale to bring most procurement and distribution activities in-house, if it would save them money,” he wrote in a research note. “We think the consolidation trend will continue, which will further pressure (Cardinal's) margins.”