McKesson to Buy FoxMeyer in Deal Worth $400 Million

McKesson Corp. said Friday that it agreed to buy FoxMeyer Health Corp.’s ailing drug unit for $400 million, including $290 million in debt, in an effort to expand its U.S. pharmaceutical distribution business.

FoxMeyer placed its FoxMeyer Drug Co. unit in Chapter 11 bankruptcy protection in August after drug makers cut credit and a planned sale to New Jersey investor William Taggart fell through.

Carrollton, Texas-based FoxMeyer, a distant fourth in the drug distribution industry after McKesson, Bergen Brunswig Corp. and Cardinal Health, is attractive to McKesson because of its customer base and facilities, analysts said. And McKesson has the know-how to correct inventory-control and technology problems.

“It’s easy enough for them to do,” said Sally Schaadt, an analyst at Fourteen Research in New York.

The planned purchase would probably make McKesson, a San Francisco-based health-care products and services company, the undisputed leader in the U.S. drug distribution industry. McKesson has been battling Bergen Brunswig for the position, she said.

The sale of the unit, which had 1995 sales of $5.5 billion, would leave FoxMeyer Health a shell company with a variety of investments.

On the New York Stock Exchange, McKesson shares rose $3.625 to $49.375, and FoxMeyer Health fell 12.5 cents to $3.50. FoxMeyer Health shares have fallen from a 52-week high of 28.375 on Dec. 8.