Cardinal to sell drug unit for $3.3 bln

By Julie Steenhuysen

CHICAGO (Reuters) - Cardinal Health Inc. (CAH.N) said on Thursday it will sell its drug manufacturing unit to the Blackstone Group for about $3.3 billion in cash as the company moves swiftly to streamline its businesses under new management, sending its shares up 4 percent.

Cardinal, one of the nation's top three drug distributors, made good on newly appointed Chief Executive R. Kerry Clark's promise to sell the underperforming unit and focus on reshaping the company.

Cardinal's Pharmaceutical Technologies and Services unit (PTS), which develops, manufactures and packages drugs and other products for its customers, has been a drag on recent quarters as it struggled with manufacturing issues.

The company on November 30 said it would divest the unit to focus on its four remaining segments serving health-care providers, such as hospitals and pharmacies.

"We view both the price and timing of the transaction as somewhat better than we had expected," John Kreger, an analyst for William Blair & Co., said in a research note in which he maintained his "outperform" rating on Cardinal's shares, citing attractive valuation and improved earnings visibility.

Cardinal's quarterly profit, reported earlier Thursday, reflected the impact of the transaction, with profit from continuing operations rising 10 percent on double-digit growth in its core businesses, topping analyst expectations.

Earnings from continuing operations rose to $316 million, or 77 cents per share, compared with $286 million, or 66 cents a share, a year earlier.

Excluding special items but including options expenses, earnings from continuing operations were 83 cents per share, beating Wall Street expectations by 5 cents, according to Reuters Estimates.