Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 12, 1994 TAG: 9407130062
SECTION: BUSINESS PAGE: C-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: INDIANAPOLIS LENGTH: Medium
The deal announced Monday is the latest in a series of mergers between drugmakers and distributors. PCS's parent, drug and toiletries wholesaler McKesson Corp., decided to sell out because of increased competition.
As with other recent deals, the purchase brings a major drug company a more secure sales pipeline. Such mergers are a way for companies to protect profits as the national health care reform movement curbs their ability to raise prices.
Lilly formerly owned Elizabeth Arden Co., which has cosmetics manufacturing and distribution plants in Roanoke. Lilly sold the Arden unit in 1971 to Unilever.
PCS is a pharmacy benefits management company, a rapidly growing sector of the health care business, which is hired to process prescription claims and monitor physician prescribing patterns.
PCS represents 50 million people, including employees of the Big Three automakers and Lilly employees, distributing roughly $6.4 billion in drugs in the fiscal year that ended in March.
The deal means that the three largest pharmacy benefits managers now are owned by drug companies.
Lilly has been reorganizing to concentrate on its core drug business and, as a result, saw its 1993 profits drop 32 percent to $480.2 million on $6.4 billion in revenue. In January, Lilly said it would sell its medical technology division.
Under the terms of Monday's deal, Lilly will pay McKesson stockholders $76 in cash for each outstanding share. A new McKesson company will include all current operations except PCS.
The deal didn't sit well with Lilly investors, who sent its shares down $7.371/2 to $50 on the New York Stock Exchange, while McKesson shares soared $24.75 to $98.
Jim Cornelius, Lilly chief financial officer, said the large debt the deal will bring probably made investors nervous. If the deal closes within 75 days, Lilly would likely borrow up to $4 billion, he said.
Memo: Unilever bought Arden in 1989 from Faberge.