EXHIBIT 99.1
Press Release
Contact: Janet Bley
(415) 983-9357
or
Sandra Sternberg
Sitric And Company
415-983-8671 or 310-788-2850
SOLIDIFYING ITS POSITION IN HEALTH CARE SUPPLY MANAGEMENT,
McKESSON ACQUIRES GENERAL MEDICAL INC.
Acquisition Opens New Markets,
Higher Margin Businesses to McKesson
SAN FRANCISCO, Tuesday, January 28, 1997 -- Continuing on a
course of investments aimed at extending its leadership
position in health care supply management, improving gross
margins and broadening its market platform, McKesson Corp.
(NYSE:MCK), today announced that it has signed a definitive
agreement to acquire privately-held General Medical Inc.
The McKesson/General Medical business combination will
create the largest health care supply management company in
North America. The company expects the acquisition to be
accretive in the first year, effectively increasing
McKesson's overall operating margin and working capital
turnover.
General Medical is the nation's leading supplier to the
full range of alternate-site health care facilities,
including physicians and clinics, long-term care and home-
care sites, and is the third largest distributor of medical-
surgical supplies to hospitals.
Alan Seelenfreund, McKesson's chairman and chief
executive officer, said, "This acquisition, which extends
McKesson's position into the fast-growing alternate-site
market, is a major step forward in our goal to become the
world leader in health care supply management. The
combination of McKesson and General Medical will create a
strong new force for shaping the health care supply market,
addressing the increasingly complex clinical supply needs of
physicians, extended-care facilities and integrated health
care net works (IHNs).
"In today's fast changing health care environment,
McKesson will innovate to provide our health care partners,
which include customers and manufacturers alike, with
services that improve the quality of health care while
maintaining a focus on controlling costs," Mr. Seelenfreund
continued. "Through this acquisition, we are reaffirming
McKesson's leadership in pharmaceutical services and
entering the field of medical-surgical supply management.
McKesson's unique combination of a nationwide logistics
network, unparalleled information technology, and strong
financial resources equips us to meet this market challenge
successfully."
Under terms of the acquisition agreement,
* McKesson will pay approximately $775 million for
General Medical including $347 million for the equity,
half in McKesson common stock and half in cash, and the
assumption of approximately $428 million in debt.
* The number of shares to be issued will be based upon an
average of the company's common stock price shortly
prior to closing, but will be no more than
approximately 3.72 million or less than 2.75 million
shares. Based upon yesterday's closing price, the
number of shares issued would be approximately 3.16
million.
* General Medical will become a wholly-owned subsidiary
of McKesson.
* Members of General Medical's senior management team
will continue with the company in their current
positions.
The alternate-site market is the fastest growing market
for pharmaceutical and medical supplies. With the aging of
the U.S. population and the shift towards more cost-
effective locations for care delivery, the alternate-site
market is expected to continue to grow well into the 21st
century. General Medical distributes more than 130,000
products produced by more than 4,000 medical and surgical
product manufacturers through a 700-person sales force to
more than 200,000 care providers nationwide, including 500
account managers calling on physicians.
Mark A. Pulido, McKesson's president and chief
operating officer, said, "General Medical will enable
McKesson to build on its national scale, offering
unparalleled marketing services to pharmaceutical and
medical-surgical manufacturers, as well as products and
services to health care providers who are demanding well-
coordinated supply solutions.
"McKesson and General Medical are coming together at
exactly the right time," Pulido continued. "General Medical
is overhauling its distribution network, and has reorganized
its sales management structure and invested heavily in new
products and programs. Since 1991, General Medical sales
have grown at an annual compound rate of approximately 20%
reaching $1.7 billion in 1996. EBIT has increased approximately
65% during the last year and is expected to be approximately
$58 million for the fiscal year ended December 31, 1996.
Operating margins have increased to 3.4% of revenues.
"We are acquiring General Medical at just the point
that its turnaround is starting to pay off," he said.
"Given McKesson's significant growth in pharmaceutical
distribution, our combined momentum will lead to improved
gross margins, increased operating income and higher profit
margins."
General Medical's chairman and chief executive officer,
Steven B. Nielsen, said, "We are overwhelmingly confident
that McKesson's capital resources and industry position will
provide General Medical with the ability to realize our
vision -- to be the leading national supplier to integrated
health systems. The opportunity to build our business with
McKesson, the nation's leading health care supply management
company, and to join a team having considerable management
expertise in this field was more than enough to convince us
to terminate our initial public offering mid-stream."
Last Friday, McKesson reported that in the third
quarter ended December 31, 1996, net income was $38.0
million or 86 cents per fully diluted share. Revenues
increase to $3.5 billion from $2.6 billion in the comparable
quarter of fiscal 1996. For the nine-month period ending
December 31, 1996, the company reported net income of $96.2
million, or $2.16 per fully diluted share, versus $2.08 per
fully diluted share in the prior year. Revenues increased
to $8.9 billion from $7.4 billion in the comparable nine-
month period.
The General Medical acquisition is the latest in a
series of recent initiatives that have moved McKesson to the
forefront of the health care supply management business:
* In December 1996, as part of a program to focus
its businesses in health care, McKesson announced
the sale of its 55% stake in Armor All Products
Corp. for $220 million.
* In November 1996, the Company completed the
acquisition of FoxMeyer Drug, adding approximately
$3 billion to McKesson annual revenues and
expanding its lead as the largest distributor in
the pharmaceutical segment.
* In April 1996, McKesson purchased Automated
Healthcare (AHI), a company producing robotic drug
dispensing equipment offering unique
pharmaceutical handling technology to health care
facilities, including the RxOBOT automated
medication-retrieval system for hospitals.
* In February 1996, McKesson launched the OmniLink
centralized pharmacy technology platform, linking
independent pharmacies into a "virtual chain" for
contracting with pharmaceutical suppliers and
managed care customers.
* In 1995, the Company established McKesson Health
Systems to serve as the platform for the Company's
institutional strategy and initiatives.
This transaction is subject to customary conditions,
including expiration of the waiting period under the Hart-
Scott-Rodino Act. The company, which is being advised by
Peter J. Solomon Company Limited in the transaction,
anticipates that it will close within two months.
General Medical, headquartered in Richmond, Virginia,
operates through a network of 50 distribution centers, seven
sales offices and three product assembly centers throughout
the United States. The company was founded in 1950 and has
been privately held since. In 1994 and 1995, General
Medical acquired F.D. Titus & Son, the medical supplies
business of Foster Medical Supply, Randolph Medical Inc.,
and the assets of Denver Surgical Supply and Goetze-Niemer
Co.
Through McKesson's U.S. health care business, its
Canadian subsidiary, Media Health and Pharmaceutical
Services, and its minority interest in Mexico's Nadro, S.A.,
McKesson is the largest distributor of pharmaceutical and
health care products in North America. The company also
owns McKesson Water Products, one of the nation's largest
distributors of bottled drinking water.
Except for historical information contained herein, the
matters discussed in this release are forward-looking
statements that involve risks and uncertainties that could
cause actual results to differ materially from those
projected. These include the trends for continued growth of
McKesson's and General Medical's core health care businesses
and risks and uncertainties described in the company's SEC
reports. The company assumes no obligation to update
information contained in this release.
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