Celesio shares surge on talk of McKesson bid

Reuters

* McKesson may offer premium of up to 30 pct -Dow Jones

* Sources tell Reuters McKesson in advanced talks

* Celesio CEO says "no urgent need" for alliance, tie-up

* Celesio shares jump as much as 21 percent

By Frank Siebelt and Sophie Sassard

FRANKFURT/PARIS, Oct 8 (Reuters) - Largest U.S. drugdistributor McKesson is in advanced talks to buy European rivalCelesio for a possible 3.74 billion-euros ($5.1 billion), amedia report said on Tuesday, sending the German company'sshares surging as much as 21 percent.

A deal involving Celesio, one of Europe's largest drugswholesale groups, has been brewing for some time as the top U.S.drugs distributors seek to boost their purchasing muscle withglobal drugs companies and get more pricing power.

Celesio, active in both drugs wholesale and retail, has spedup the expansion of its network of pharmacies in continentalEurope under the Lloyds brand, but has faced a price war amongGerman drugs distributors.

Industry sources familiar with the situation have toldReuters that Celesio was in talks on McKesson or rival CardinalHealth taking a stake in Celesio and with U.S. drugstorechain CVS Caremark over joint purchasing.

Two people close to the matter told Reuters on Tuesday thatMcKesson was nearing a decision on whether to bid.

News agency Dow Jones on Tuesday cited people familiar withthe matter as saying that if U.S.-based McKesson decides to makea bid, it could offer a premium of up to 30 percent, or close to22 euros per share, in a report also published by sister brandThe Wall Street Journal Online.

The Reuters sources said the largest U.S. drug distributorcould baulk at paying the mooted premium.

Celesio and majority owner Franz Haniel & Cie declined to comment.

McKesson was not immediately available for comment.

Celesio shares closed 20 percent higher at 20.49 euros, amore than 3-1/2 year high.

"The market will no doubt want to speculate that both CVSand Cardinal are potential counter bidders for Celesio,"Olivetree analyst Mark Kelly wrote in a note to investors.

McKesson shares jumped 4.8 percent.

In an interview with daily Boersen-Zeitung, CEO MarionHelmes said there was "no urgent need" for an alliance or tie-upwith a U.S. partner but such a deal could boost purchasing powerto get better discounts from generic drugmakers.

Dow Jones said that under a likely deal structure, SanFrancisco-based McKesson would launch a voluntary takeover offerfor all Celesio shares, with Franz Haniel, which owns just over50 percent, having agreed to tender its stake.

McKesson has gained access to the books of Celesio, DowJones said, adding that the company may announce a bid as earlyas this month if it decides to go ahead.

The three largest drugs distributors in the United States,AmerisourceBergen, Cardinal and McKesson, which betweenthem account for 95 percent of the U.S. market, are all lookingto grow abroad to gain purchasing power with drug makers.

In March, pharmacy chain Walgreen Co and itsEuropean partner Alliance Boots signed a 10-yearpurchasing deal with AmerisourceBergen.

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