Money will be used to repurchase company shares.
Cardinal Health reported plans to divest its Pharmaceutical Technologies and Services (PTS) segment, which generates $1.8 billion in revenue. The PTS division manufactures or packages 100 billion doses of medication every year for pharmaceutical and biotech firms and employs approximately 10,000 at more than 30 facilities, says the company.
“In the coming years, Cardinal Health will focus more on our products and services that help providers improve the safety and productivity of healthcare,” explains R. Kerry Clark, president and CEO. “While synergies clearly exist between PTS and our other businesses, we believe there is greater customer and shareholder value in the expansion of our supply-chain and medical and clinical products businesses domestically and internationally. These segments align with our core competencies and customers, and we see significant opportunities for future growth and improved return on capital.”
Cardinal Health says it will retain Martindale and Beckloff Associates, two businesses that support the generic pharmaceutical market. Martindale develops generic, intravenous medicine that is complementary to the company’s hospital business and generics strategy. Beckloff provides regulatory consulting services.
Cardinal Health expects to use the proceeds to repurchase its shares. The company says its board initially authorized an additional $1 billion, bringing the total repurchase authorization to $3 billion for fiscal 2007 and 2008. To date in fiscal 2007, the company has purchased approximately $500 million in shares and plans to complete a total of $1.5 billion by the end of fiscal 2007. Cardinal Health will also continue to invest in organic growth and tuck-in acquisitions to strengthen existing product and service offerings.
The PTS segment is the leading contract manufacturing, contract packager, and service provider for the pharmaceutical industry, according to Cardinal Healt. As a standalone company excluding Martindale and Beckloff, the company estimates the business would generate in excess of $300 million in earnings before interest, taxes, depreciation, and amortization.