Drug Wholesaler Cardinal to Buy Manufacturer Pyxis
Cardinal Health Inc., a leading drug wholesaler, will buy Pyxis Corp., a maker of drug management systems for hospitals, in a stock deal worth $920 million, the companies said Wednesday.
The merger of San Diego-based Pyxis Corp. into Cardinal Health follows an industrywide trend of mergers and diversification among health care providers as they position themselves to preserve profits in an era of cost cutting.
Analysts said the deal would allow Cardinal Health to rely less heavily on drug wholesaling and would benefit Pyxis shareholders.
“Over the last several years, drug wholesalers have become more sophisticated,” said Donald Spindel, an industry analyst with A.G. Edwards in St. Louis. “This is a very key move from a strategic standpoint.”
Cardinal, based in the Columbus suburb of Dublin, is one of the country’s largest wholesalers of drugs, health and beauty products. It serves pharmacies, health maintenance organizations and hospitals and earned $85 million in the fiscal year ended June 30, on revenues of $7.81 billion.
Last fall, Cardinal bought Medicine Shoppe International in a $348-million stock-swap. Medicine Shoppe is the nation’s largest franchiser of retail pharmacies, with more than 1,000 stores in 47 states and overseas.
“Cardinal has been progressively expanding its business beyond the purely logistical side of drug distribution to providing a full range of value-added information, marketing and educational services to our customers,” said Robert D. Walter, the company’s chairman and chief executive.
Merging Cardinal and Pyxis would allow the combined company to offer customers and manufacturers services to control health care costs, Walter said.
Pyxis manufactures systems that automate the management and dispensing of drugs in hospitals and other health care facilities. Its major product is called Medstation, and a companion product called Supplystation tracks other hospital supplies. It earned a profit of $34.8 million on $202.9 million in revenue in 1995.
Under terms of Wednesday’s agreement, shareholders of Pyxis will receive 0.4066 shares of Cardinal Health stock for each share of Pyxis they own at the time the transaction closes. Cardinal will issue 15.5 million new shares. The transaction value is based upon Tuesday’s closing stock price for Cardinal.
The deal values Pyxis at $24.14 per share, a hefty 53% premium over its closing share price Tuesday of $15.75. Pyxis shares soared $6.375, to $22.125, Wednesday on the Nasdaq. Cardinal shares fell $2.50, to close at $56.875, on the New York Stock Exchange.
The merger is expected to be completed by early summer if approved by shareholders and regulators.
