(Reuters) - UDG Healthcare Plc (UDG.L) said it would sell its Irish drug distribution businesses to U.S. drug wholesaler McKesson Corp (MCK.N) for 407.5 million euros ($466 million) to cut debt and raise funds for acquisitions.
Shares of UDG, which is also selling a unit of its commercial services business as part of the deal, rose more than 6 percent in morning trading, making it the top gainer on the FTSE-250 Midcap Index .FTMC.
The healthcare services provider also named Chief Operating Officer Brendan McAtamney its new chief executive, replacing Liam FitzGerald, who retires in March 2016.
UDG, which traces its roots to a co-operative called the United Drug Chemical Co in Ireland, has been facing pressure from the recent consolidation in the global drug wholesaling market as its drug distribution is limited to the island.
Following the sale of its MASTA business and United Drug supply chain in Ireland and Northern Ireland, the company will be left with healthcare services, healthcare communications and packaging services units.
“We have ambitious growth plans and we intend to use the net proceeds of 277.5 million euros from this disposal to realize those, including the pursuit of further strategic M&A opportunities,” FitzGerald said on a call.
UDG has been growing its contract outsourcing and healthcare communications business through acquisitions.
The units being sold accounted for more than half of the company’s first-half revenue, but their contribution was only about a quarter to its adjusted operating profit.
McKesson said the acquisition follows its recent deal for 281 pharmacies operated by Sainsbury’s in the UK.
Both deals were expected to close in the first half of 2016 and add 10-14 cents to adjusted earnings per share in the first 12 months following the acquisitions, the U.S. company said.
Reporting by Roshni Menon in Bengaluru; Editing by Gopakumar Warrier and Anil D'Silva