McKesson Corp. announced today that it was buying US Oncology, a Welsh Carson portfolio company, for $2.16 billion, including debt.
US Oncology has about $1.6 billion in debt, according to an August 10Q filing, which values the sale at about $560 million. The company had $28.1 million in income from operations for the quarter ended June 30, down nearly 24% from about $36.8 million for the same time period in 2009. US Oncology posted a net loss of about $12 million for the quarter ended June 30, which narrowed from $16.4 million in losses in 2009.
With a $2.16 billion price tag, US Oncology sold for about 10x EBITDA. The company is believed to have about $200 million in annual EBITDA, one buyout exec says. “This is a fairly full price,” a banker says.
The Woodlands, Texas-based US Oncology mainly services oncologists and provides front and back office support, drug distribution and research to its 1,300 affiliated physicians, a spokeswoman says.
US Oncology is too big for most buyers, one banker says. Outside of McKesson, only AmerisourceBergen or Cardinal Health could have acquired US Oncology, the source says.
Welsh Carson has unofficially been looking for a buyer for years. The New York PE firm invested in US Oncology in 2004. “Welsh Carson has owned it forever,” the banking source says. “It’s well past time they wanted to sell.”
Welsh Carson also has another health care company up for sale. Earlier this year, the PE firm put Concentra, which provides health care and wellness services to employers and the general public, on the block. Barclays is advising.
The Concentra auction has stalled because there are not a “lot of logical buyers for it,” the banker says. Concentra is trying to transform itself from a worker’s health provider to a provider of primary care clinics, the source says. “The auction is not going well and they’re trying to sell themselves to another sponsor,” the person says.
Officials for Welsh Carson couldn’t be reached for comment.\
UPDATE: A spokeswoman for US Oncology says that the company has roughly $235 million in annual EBITDA, so the multiple it sold for is about 9x trailing EBITDA.