) recently announced that the company has entered into a
definitive agreement with Canadian distributor Kohl & Frisch
Limited aimed at divesting its Canadian Pharmaceutical
As per the agreement, AmerisourceBergen Corporation will sell
its Canadian pharmaceutical distribution business,
AmerisourceBergen Canada Corporation (ABCC) to Kohl & Frisch
Limited for approximately $80 million - $100 million.
AmerisourceBergen Corporation will hang on to its specialty
business unit in Canada.
The performance of the ABCC unit has been disappointing in
recent times. On its first quarter fiscal 2013 earnings
conference call in Jan 2013, AmerisourceBergen stated that ABCC
was having a tough time in implementing a large new retail
contract in the Canadian market due to significant reimbursement
challenges, particularly for generics.
The transaction is expected to close in the third quarter of
fiscal 2013. As a result of the sale, AmerisourceBergen
Corporation expects to record an estimated loss on sale and other
impairment charges in the range of $160 million and $180 million
in the second quarter of fiscal 2013.
Consequently, AmerisourceBergen revised its guidance for 2013.
AmerisourceBergen now expects revenues in 2013 to grow by roughly
8% to 10% compared to the previous guidance of 8% - 11%.
AmerisourceBergen increased its earnings guidance in fiscal
2013 to $3.04 - $3.14 from the earlier estimated range of $2.96 -
$3.06. The Zacks Consensus Estimate for fiscal 2013 stands at
The revised guidance does not include the impact of
extraordinary expenses related to the distribution deal signed
) and Alliance Boots GmbH in Mar 2013.
We note that last month AmerisourceBergen entered into a
strategic agreement with Walgreen and Alliance Boots GmbH. The
agreement includes a 10-year pharmaceutical distribution contract
with Walgreens and access to generic drugs and related
pharmaceutical products through the Walgreens Boots Alliance
Development joint venture.
In return, both Walgreens and Alliance Boots have been granted
rights to jointly purchase a minority equity position in
We note that Walgreens chose AmerisourceBergen over peer
) with whom it already had a pharmaceutical distribution contract
but decided not to renew the same.
AmerisourceBergen carries a Zacks Rank #3 (Hold). Right now,
CVS Caremark Corporation
) looks well placed with a Zacks Rank #2 (Buy).
AMERISOURCEBRGN (ABC): Free Stock Analysis
CARDINAL HEALTH (CAH): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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