Cardinal Health, a Fortune 500 healthcare services and drug distributing company based in Dublin, Ohio, is set to buy AssuraMed, a privately-held home care company, for $2.01 billion.
The deal has a net value of $1.9 billion and is expected to be completed by April 2013. The agreement was financed with $1.3 billion in new senior unsecure notes with the remainder to be paid in cash.
The acquisition of AssuraMed by Cardinal was received positively by numerous markets. It is being considered a ‘platform’ purchase aimed at providing Cardinal Health entry into the home healthcare segment, and will serve as a platform on which Cardinal can now build with all its resources at its disposal.
Cardinal’s stock went up 1.2 percent to $ 46 per share following the announcement – a high in 52 weeks.
Officials from Cardinal Health have been hinting that there could me similar acquisitions in the home healthcare segment moving forward. The first priority, however, is to make the acquisition of AssuraMed a success. Having invested a huge amount of capital, Cardinal is now focused on integrating AssuraMed into its folds.
Overtime, Cardinal will leverage the acquisition, with additional acquisitions soon, according to Jeff Henderson, Cardinal’s chief financial officer.
“It seems like a very straightforward, value-creating deal,” said Ross Muken, an analyst with ISI Group. “AssuraMed complements Cardinal’s pharmaceutical-distribution business and could also serve as a long-term platform to add on additional bolt-on acquisitions focused on the direct-to-home market.”
According to George Barett, Cardinal’s chief executive officer, the business of treating people at their homes is worth close to $16 billion a year now, and this amount is set to grow over the years. The rate of those suffering from obesity and other chronic diseases is increasing, as is the volume of the aging population.
Barett believes in the changing trend in the medical supply distribution segment, in which more and more distributors are aiming to get a share of the “delivering-medicine-to-people’s-homes” pie.
“The home healthcare market is growing at nearly 7 percent a year, and a research study projects that this figure is set to increase over the next decade. It means that we need to do this in a new way, a more coordinated way and deliver it in the right setting and by the right caregiver. Our strategy is to serve the health system across the continuum of care. The base of our home health operations will remain in Twinsburg,” Barrett added.
Til now, the core business of Cardinal Health has been the distribution of pharmaceuticals. It also distributes medical supplies to hospitals, surgical centers and physicians’ offices. Entering the home healthcare segment is a strategic move keeping the future in mind.
AssuraMed, based in Twinsburg, Ohio, is a home distributor of a wide range of disposal medical products, including supplies for people suffering from chronic diseases such as diabetes, respiratory issues, incontinence, etc.
Edited by Braden Becker