AmerisourceBergen Aims to Offload Biz

Zacks

AmerisourceBergen Corp. (ABC) recently announced that it has inked a definitive agreement to sell its contract packaging unit, AndersonBrecon, to a conglomerate of an investor group led by Frazier Healthcare VI, L.P for approximately $308 million in cash.

The conglomerate includes affiliates of Greenspring Associates, QIC Global Private Equity and Thomas McNerney & Partners and has been formed solely for the acquisition of AndersonBrecon.

The results of AndersonBrecon are reported as discontinued operations.  Consequently, the sale of this business therefore will not impact AmerisourceBergen’s guidance for fiscal 2013.

We note that AmerisourceBergen has been streamlining its portfolio in recent times. The company reportedly sold its Canadian pharmaceutical distribution business, AmerisourceBergen Canada Corporation (TVTV) to Kohl & Frisch Limited for approximately $80 million – $100 million. AmerisourceBergen will however retain its specialty business unit in Canada.

Following the announcement to sell its Canadian Pharmaceutical Distribution Business on Mar 28, 2013, AmerisourceBergen revised its guidance for 2013.

AmerisourceBergen now expects revenues in 2013 to grow by roughly 8% to 10% compared to the previous guidance of 8% – 11% growth.

AmerisourceBergen increased its earnings guidance for fiscal 2013 to $3.04 – $3.14 from the earlier projected range of $2.96 – $3.06.

We believe the company is well positioned for growth given the strong performance of its generics business. In Mar 2013, the company struck a 10-year deal with Walgreens (WAG) which is expected to add approximately $2 billion to top line in fiscal 2013.

We note that Walgreens chose AmerisourceBergen over peer Cardinal Health (CAH) with whom it already had a pharmaceutical distribution contract but decided not to renew the same.

AmerisourceBergen carries a Zacks Rank #3 (Hold). Right now, CVS Caremark Corporation (CVS) looks well placed with a Zacks Rank #2 (Buy).

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