AmerisourceBergen to sell Canadian division

AmerisourceBergen to sell Canadian distribution business, boosts guidance for fiscal year

Associated Press

VALLEY FORGE, Pa. (AP) -- Pharmaceutical wholesaler AmerisourceBergen Corp. said Thursday that it reached a deal to sell its money-losing Canadian pharmaceutical distribution business and boosted its profit guidance for the year.

Under the terms of the agreement, AmerisourceBergen Canada Corp. will be sold to Kohl & Frisch Ltd., a Canadian-owned national distributor. The deal is expected to close in the third quarter of fiscal 2013 and doesn't include AmerisourceBergen's Canadian specialty business.

The sale price is estimated at between $80 million and $100 million, of which about half will be financed by AmerisourceBergen. As a result, the company said it expects to record an estimated loss on the sale and other impairment charges of between $160 million and $180 million for the current quarter.

The Canadian distribution business represented about 2 percent of AmerisourceBergen's total revenue.

Citi Investment Research analyst George Hill backed his "Buy" rating and $62 price target for AmerisourceBergen stock, saying that the sale will rid the company of a money-losing operation, noting that the Canadian market has been a tough one for distributors because of its lower reimbursement rates for generic drugs.

Hill said that the move shows that the company's efforts to get reimbursement rates raised weren't successful and that it didn't expect better results going forward. He also noted that the company also felt that the Canadian operations didn't have the scale it wanted and that the move will allow it to focus on its partnership with Walgreens.

AmerisourceBergen reached a deal with the nation's largest drugstore chain for a new 10-year supply agreement last week.

As a result of the sale, AmerisourceBergen boosted its prediction for fiscal 2013 earnings from continuing operations to a range of $3.04 to $3.14 per share. It had previously projected a range of $2.96 to $3.06 per share. It expects to repurchase about $400 million in stock, which should benefit earnings per share.

AmerisourceBergen also said it expects revenue growth of between 8 percent and 10 percent. Based on the company's fiscal 2012 revenue of $79.49 billion, the guidance implies 2013 revenue of $85.85 billion to $87.44 billion.

Analysts, on average, expect a fiscal 2013 profit of $3.04 per share on $86.81 billion in revenue, according to FactSet.

AmerisourceBergen shares rose 42 cents to $51.13 in midday trading.

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