NEW YORK (CNNfn) - McKesson & Co., undeterred by its thwarted acquisition of a rival healthcare-products distributor, agreed on Monday to buy HBO & Co., a healthcare information systems provider, in a deal valued at $14.5 billion.
Under terms of the deal, which will create the world's largest healthcare-management company, HBOC shareholders will receive 0.37 shares of McKesson stock for each HBOC share they own.
McKesson is the industry's No. 1 healthcare supply management company. HBOC is the nation's leading healthcare information company.
The industry-leading combination, however, got a cool response from Wall Street.
HBOC (HBOC) shares were off 3-7/16 at 26-1/8 on the Nasdaq, while McKesson (MCK) shares remained flat at 88-11/16 on the Big Board just after the opening bell Monday.
The merger, which will be accounted for as a pooling of interests, is subject to regulatory approval and is expected to close in the first quarter of 1999.
"The fragmentation of healthcare information and therapeutic product supply among the many sites and organizations involved in healthcare delivery is a major impediment to improving clinical outcomes and achieving productivity gains," Charles W. McCall, chairman, president and chief executive officer of HBOC, and Mark A. Pulido, president and chief executive officer of McKesson, said in a joint statement. "Our vision for McKesson HBOC is a comprehensive offering to improve productivity and clinical outcomes for the U.S. healthcare system."
McKesson expects cost savings resulting from the merger to reach $75 million in the first full year, and more than $150 million in the next three years.
Following the merger, the company will be named McKesson HBOC and will have operations in the United States and 10 countries abroad.
When combined, the two companies will have a customer base of about 5,000 hospitals, 25,000 retail pharmacies, 35,000 physician practices, 10,000 extended care sites, 600 payors, 450 pharmaceutical manufacturers and 2,000 medical-surgical manufacturers.
Late last month, McKesson agreed to buy Novatis Pharmaceuticals Corp.'s Red Line HealthCare Corp. unit for $230 million in cash and debt.
Golden Valley, Minn.-based Red Line is a distributor of medical supplies and services to the extended care industry.
In August, McKesson called off its planned $2.25 billion acquisition of AmeriSource Health, after a federal judge granted a government request to block the merger. Bergen Brunswig Corp. and Cardinal Health Inc. canceled their pending $2.62 billion merger for the same reason.
AmeriSource is a wholesale distributor of pharmaceuticals and related healthcare products and services.
The Federal Trade Commission had sought a preliminary injunction against the mergers, noting that the two resulting companies would control 80 percent of the market, substantially reducing competition.