McKesson, HBO Stocks Tumble After Deal

Shares of McKesson Corp. and HBO & Co. tumbled after McKesson’s proposed $14-billion acquisition of HBO left investors wondering how the combined company’s sales forces could package products as different as drugs and computer services. Shares of San Francisco-based McKesson, the No. 1 U.S. drug wholesaler, fell $12.69, or 14%, to close at $76 on the New York Stock Exchange, while HBO, the largest software supplier to the health-care industry, fell $4.38, or 15%, to $25.19 on Nasdaq. McKesson plans to give HBO shareholders 0.37 McKesson shares for each HBO share. McKesson said it is buying HBO to give it access to the Atlanta-based company’s higher-margin products and stay ahead of fast-growing rivals such as Cardinal Health Inc. Both companies say they can boost sales and profit by using existing sales forces to sell each other’s products to customers such as hospitals. The merger “doesn’t really make sense,” said Ed Ho, a senior analyst with AIM Advisors Inc., which owns about 1.7 million shares in McKesson. “McKesson hasn’t had any experience with HBO’s line of business and vice versa. The synergies just aren’t there.” The decline in McKesson’s share price cut the value of the acquisition to about $12.4 billion from more than $14 billion based on Friday’s closing stock price.