Cardinal Health announces plans to acquire The Harvard Drug Group

Cardinal Health today announced plans to acquire The Harvard Drug Group (THDG), a distributor of generic pharmaceuticals, over-the-counter medications and related products to retail, institutional and alternate care customers. THDG is currently owned by Court Square Capital Partners. Cardinal Health will pay $1.115 billion using existing cash and new debt. The transaction is expected to close in the beginning of fiscal year 2016 subject to regulatory approvals and other customary closing conditions.

Assuming this timing, Cardinal Health expects accretion in non-GAAP diluted earnings per share (EPS) from continuing operations of greater than $0.15 per share in fiscal 2016, net of the $0.03 to $0.04 per share of interest expense for the related debt financing. Cardinal Health expects accretion in non-GAAP diluted EPS of more than $0.20 in fiscal 2017 and for accretion to be increasingly greater thereafter.

In addition to enhancing the company's generic pharmaceutical distribution business, the acquisition expands Cardinal Health's existing telesales programs and capabilities; broadens the company's portfolio of over-the counter pharmaceutical products; and brings specialized packaging offerings to meet the needs of hospital systems and other institutions.

Headquartered in Livonia, Mich., The Harvard Drug Group had revenues of approximately $450 million in 2014. There are 450 employees and two distribution facilities included in the transaction.

"The Harvard Drug Group aligns perfectly with our commitment to provide the most comprehensive line of pharmaceutical products for the broadest range of customers," said George Barrett, chairman and chief executive officer of Cardinal Health. "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."

FY16 Earnings Guidance
As a result of this planned acquisition and the pending acquisition of Cordis, Cardinal Health is providing its preliminary expectations for fiscal 2016 non-GAAP diluted EPS from continuing operations of $4.75 to $5.05. This range is based on the assumptions that the THDG transaction closes in the first quarter of fiscal 2016 and that the previously announced Cordis acquisition closes in the United States and key non-U.S. countries towards the end of calendar 2015. The company expects to issue $1.5 billion of new debt related to these two acquisitions. The company expects to discuss its fiscal year 2016 financial outlook in detail on its fourth quarter fiscal 2015 earnings call scheduled for July 30, 2015.

Webcasted events
Cardinal Health will webcast its Dublin Day Investor/Analyst meeting from 10:10 a.m. to 11:00 a.m. Eastern today, during which its executives will discuss the matters referenced in this release. To access the call, participants can dial 855-241-2663 and use conference ID 7246584. To access the webcast and a corresponding slide presentation and Frequently Asked Question & Answer document, go to the Investors page at ir.cardinalhealth.com. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting.

In addition, Cardinal Health will be presenting at the Goldman Sachs 36th Annual Global Healthcare Conference on Wednesday, June 10 at 10:00 a.m. Pacific time in Rancho Palos Verdes, Calif.

The company plans to release fourth-quarter and full year fiscal 2015 financial results and fiscal year 2016 guidance on Thursday, July 30, 2015 prior to the opening of trading on the New York Stock Exchange. A webcast and conference call has been scheduled for July 30 at 8:30 a.m. Eastern to discuss the results and guidance. The call and corresponding slide presentation can be accessed by going to the Investors page at ir.cardinalhealth.com or by dialing 913-312-1448 and using passcode 5598613. There is no pre-registration for the call. Participants are advised to dial into the call at least 10 minutes prior to the start time. Presentation slides and an audio replay will be archived on the Cardinal Health website after the conclusion of the meeting. The replay will be available until Thursday, Aug. 6, 2015 and by dialing 719-457-0820 and using passcode 5598613.

NON-GAAP FINANCIAL MEASURES (INCLUDING FOOTNOTE)
Footnote (1) Non-GAAP diluted earnings per share from continuing operations: (A) earnings from continuing operations, excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits), and (6) loss on extinguishment of debt, each net of tax, (B) divided by diluted weighted average shares outstanding.

Cardinal Health presents non-GAAP diluted earnings per share from continuing operations on a forward-looking basis. The most directly comparable forward-looking GAAP measure is diluted earnings per share from continuing operations. Cardinal Health is unable to provide a quantitative reconciliation of this forward-looking non-GAAP measure to the most directly comparable forward-looking GAAP measure, because Cardinal Health cannot reliably forecast restructuring and employee severance, amortization and acquisition-related costs (which Cardinal Health expects to increase significantly as a result of pending acquisitions), impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net, and LIFO charges/(credits), which are difficult to predict and estimate. Please note that the unavailable reconciling items could significantly impact Cardinal Health's future financial results.