HBO & Co. (HBOC) shareholders will receive 0.37 shares of McKesson (MCK) common stock for each share of HBO & Co. stock in a tax-free exchange.The new company will be called McKesson HBOC. The deal is expected to close early next year following regulatory and shareholder approval.
McKesson, based in San Francisco, is the nation's top drug wholesaler, with annual revenues of $18.1 billion.
HBO & Co. makes information systems that include clinical, financial, billing, physician practice and medical records software. It has annual sales of $1.2 billion.
On Friday, shares of McKesson closed up 3/16 at 88 11/16 while shares of HBO & Co. added 11/16 to 29 9/16.
Charles W. McCall, the chairman, president and chief executive of HBO & Co., will become chairman of McKesson HBOC. Mark A. Pulido, the president and chief executive of McKesson, will become president and chief executive of the new company.
The McKesson HBOC board of directors will consist of five members each from the current boards of the two health care companies.
The two companies will have a combined customer base of about 5,000 hospitals, 25,000 retail pharmacies, 35,000 physician practices, 10,000 extended care sites, 450 pharmaceutical manufacturers and 2,000 medical-surgical manufacturers.
McKesson HBOC will have operations through the United States and 10 other countries.
"We will provide the tools and technologies to enable health care providers to increase their efficiency, reducing their costs of doing business, while at the same time improving the quality of care for patients," McCall and Pulido said in a joint statement.
The merger, if approved, is just the latest in a series of deals that have through the health care industry.
Earlier this month Cardinal Health, the nation's second-largest drug wholesaler, purchased health products company Allegiance Corp. for sock valued at about $4.5 billion.
In August, McKesson called off its planned acquisition of the nation's fourth-largest drug wholesaler AmeriSource Health Corp. for $1.75 billion after the Federal Trade Commission successfully obtained a temporary injunction against the deal for fear it would reduce competition in the drug wholesale business.
The injunction also caused Cardinal Health to scuttle its planned takeover of No. 3 drug wholesaler Bergen Brunswig Corp.