Cardinal Health Agrees to Sell Contract Services Unit to The Blackstone Group for $3.3 Billion

Jan 26, 2007

Dublin, Ohio (Jan. 25)—Cardinal Health (www.cardinal.com) agreed to sell its contract services unit, Pharmaceutical Technologies and Services (PTS), to The Blackstone Group (New York, NY, www.blackstone.com) for roughly $3.3 billion in cash. Blackstone is acquiring the PTS businesses that develop, manufacture, and package medication and other products for the pharmaceutical and biotechnology industries. The PTS segment employs roughly 10,000 at more than 30 facilities worldwide and generates $1.8 billion in annual revenue.

Cardinal Health had announced in November 2006 its plans to divest the PTS segment.

“We made very rapid progress in less than two months to reach an agreement with such a quality organization as The Blackstone Group,” said R. Kerry Clark, president and CEO of Cardinal Health, in a prepared statement. “The move allows us to accelerate the repurchase of Cardinal Health shares and focus our full attention on our mission to help make health care safer and more productive through our supply-chain and clinical products businesses.”

Cardinal Health plans to use the net proceeds from the sale to repurchase shares. The sale is expected to generate roughly $3.1 billion in after-tax proceeds. The net book value of the PTS segment is about $2 billion. The sale is expected to close early in Cardinal Health's fiscal fourth quarter and is subject to customary closing conditions, including regulatory approvals.

Cardinal Health's decision to sell the PTS segment is part of the company's strategy to focus resources on its four remaining segments serving health-care provider customers, such as hospitals and pharmacies. Cardinal Health is retaining Martindale and Beckloff Associates, two businesses that support the generic pharmaceutical market. Martindale develops generic, intravenous medicines that are complementary to Cardinal Health's hospital business and generics strategy. Beckloff provides pharmaceutical regulatory consulting, including services for Cardinal Health generic products. Combined, these businesses have approximately 400 employees at two primary locations in the United States and United Kingdom.

The Blackstone Group is a global private investment and advisory firm. It investments in pharmaceuticals include a stake in Emcure Pharmaceuticals Limited (Pune, India, www.emcure.co.in), a vertically integrated pharmaceutical company based in India, and Gerresheimer (Duesseldorf, Germany, www.gerresheimer.com), a pharmaceutical packaging company.

Cardinal Health agrees to acquire SpecialtyScripts Pharmacy

In another move, Cardinal agreed to acquire SpecialtyScripts Pharmacy (Fall River, MA, www.specialtyscripts.com) to broaden its specialty pharmaceutical service offerings. With the acquisition, Cardinal Health intends to develop services for pharmaceutical manufacturers that complement the company’s existing portfolio of nuclear pharmacies, third-party logistics offerings, and distribution services for blood and plasma products.  The acquisition is expected to close in the third quarter. Financial terms were not disclosed.