McKesson to sell European businesses, focus on growth in the U.S. and elsewhere
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Pharmaceutical distributor McKesson Corp. plans to sell its European businesses in six countries to the Phoenix Group in order to prioritize its services in the U.S.
The sale includes its businesses in France, Italy, Ireland, Portugal, Belgium and Slovenia, McKesson AG’s headquarters in Stuttgart, Germany, its German wound-care business Recucare GmbH, its shared services center in Lithuania and its 45% ownership stake in Brocacef, the company’s joint venture based in the Netherlands.
“Today’s transaction marks an important step in advancing McKesson’s commitment to streamline the business and prioritize investments in the areas where we have deep expertise,” said Brian Tyler, the chief executive officer of McKesson in a statement. “Our goal is to accelerate our growth strategies, becoming a more focused organization and enabling our mission to improve care in every setting.”
McKesson officially entered the sales agreement with Phoenix Group—a leading integrated healthcare provider in Europe—on Wednesday, and the transaction is expected to close in 2022.
The company stated it will continue to operate its remaining European businesses in the UK, Norway, Austria and Denmark, but will search for alternative ownership options so it can direct future investments outside of Europe.
This deal will be largely positive for McKesson as a way to eliminate operational drags and possibly refocus its resources toward new growth opportunities in specific areas of healthcare, said Brian Tanquilut, a healthcare stock analyst with Jefferies.
McKesson could benefit from avoiding foreign exposure because Europe and the U.S. have contrasting healthcare systems, which leads to different pricing and profitability dynamics, as well as different approaches in handling the COVID-19 pandemic, Tanquilut said.
“[America has] reopened and vaccinated much quicker than the rest of the world,” he said. “From that perspective alone, you have to discount earnings, revenue or the valuation that you put in the stock because [McKesson’s] operations and their performance in Europe is still not as good as what it is in the U.S.”
During 2020, McKesson reported total revenues of $231.1 billion, a financial growth of 8% from the previous year. In the U.S., where it is one of the largest wholesale drug distributors, McKesson reported revenues of $183.3 billion and an operating profit of $2.8 billion.
Its European segment saw $27.4 billion in revenues and an operating loss of $261 million. Part of the losses were due to the company’s minority equity stake in its Germany joint venture with Walgreens Boots Alliance, which McKesson plans to retain.
McKesson declined to comment on the agreement with Phoenix until after latest quarterly financial results release on August 4.