UDG Heathcare plans to use some of the proceeds from the €408m cash sale of its Irish pharmaceutical distribution business to bolster its presence in the United States via acquisition activity, according to chief financial officer Alan Ralph.
It's selling the business to Fortune-500 pharma wholesale and retail giant McKesson Corporation. San Francisco-based McKesson owns Germany's Celesio, which controls the Lloyds Pharmacy chain, as well as other businesses all over Europe.
UDG also announced that its long-time chief executive, Liam FitzGerald, is to retire next year.
Mr FitzGerald, who turned 50 this year, joined UDG in its previous incarnation as United Drug in 1992. He was appointed chief executive at the company in 2000 at the age of just 35. He had previously worked with packaging group Jefferson Smurfit, now Smurfit Kappa.
He'll be succeeded by Brendan McAtamney, UDG's chief operating officer, who joined the group in 2013.
The sale announced by UDG also includes its UK-based travel healthcare business, MATSA.
UDG said the sale, which will see about 1,000 of its staff move employer, is in line with its strategy to focus on its higher growth, higher margin businesses. Apart from its pharmaceutical distribution business, UDG operates a major contract sales and marketing business, a drug packaging arm, and a business that sells to the medtech industry.
Growth in the pharmaceutical distribution business in Ireland has been hampered over the past few years, and has been hit by the imposition of Government controls on the pricing of medicines.
Less than a year ago, Mr Ralph said that UDG remained committee to its drug distribution business.
Revenue at the unit fell 2pc to €1.45bn in UDG's last financial year, while operating profit declined 13pc to €40.2m.
UDG's total revenue rose 5pc in its last financial year to €2.1bn, while adjusted operating profit rose 9pc to €102.6m.
Mr Ralph previously said that he expected the distribution division to eventually flatten out and improve again, helped by an aging population.
Speaking yesterday, Mr Ralph said that UDG will also be in a net cash position after it uses some of the proceeds from the sale to pay down debt.
It will have pro-forma net cash of €102.6m once the deal completes. net proceeds from the sale to McKesson will amount to €377.5m.
While the bulk of the deal proceeds are earmarked for investments and debt repayment shareholders can also expect to see a direct benefit from the sale.
"We intend to have a higher dividend in 2016 than in 2015, even though profits will decline following the latest sale," said Mr Ralph.
The sale to McKesson is subject to shareholder approval and an extraordinary general meeting will be held on October 13.
The deal is expected to close by the end of next March, subject to regulatory approval.
The acquired operations will be part of McKesson's international pharmaceutical distribution and services business.