PSS World Medical sold to McKesson for $1.46 billion

An agreement worth $1.46 billion to acquire PSS World Medical joins the Jacksonville-based company with one of the world's largest medical industry suppliers.

PSS World Medical and the McKesson Group of San Francisco announced Thursday an agreement that could take six months to finalize and up to four years to complete.

"We saw the opportunity that coming together we could help transform an industry as opposed to transforming our business," said Gary Corless, president and chief executive officer of PSS World Medical. When the deal is completed, Corless will become chief operating officer of the combined medical business of McKesson.

Corless didn't directly say what the acquisition would mean for the 780 PSS employees at its Jacksonville headquarters off Southpoint Boulevard and about 4,000 employees nationwide.

"My role as chief operating officer will be based out of Jacksonville," he said. "They don't need the products we have, they need the expertise and the expertise is in the people. … We will look at both businesses. I am a big fan of Jacksonville."

The transition phase after the deal is done could take four years, Corless said.

The deal was amicable, Corless said.

"It was not hostile," he said. "We've competed with and therefore have known McKesson through the industry and on the street for 30 years. We know each other well and have a high degree of respect for each other. … That certainly makes it easier."

Jenny Kobin, vice president of PSS World Medical investor relations, said it could be nearly a half-year before the deal is done. In the meantime, operations at PSS World Medical will continue as normal with a shareholder vote on the transaction likely to come by the end of the year, Kobin said. There also will be filings submitted to the U.S. Securities and Exchange Commission that have to be reviewed.

"PSS" stands for Physician Sales & Service. The company was founded in 1983 and specializes in supplies for the health care industry.

McKesson also is in the medical supply industry and is ranked 14th on the Fortune 500 list, with $3.15 billion in annual revenue. It has several branches of operations, including pharmaceutical distribution, health care information technology, clinical decision support and health care records systems. McKesson has about 40,000 employees worldwide.

The company is worth $120 billion, Corless said.

Two telephone messages seeking comment from McKesson officials Thursday were not returned. In a news release, chairman and CEO John Hammergren named Stanton McComb, who has led McKesson's Medical Surgical business since March 2011, as president of the combined company.

McKesson will pay $29 per share for PSS World Medical, a 34.3 percent premium over Wednesday's closing price. The San Francisco-based company values the deal at $2.1 billion including PSS World's debt.

PSS World Medical had $2.1 billion in revenue in its latest fiscal year. It will become part of McKesson's medical-surgical business. PSS World Medical shares climbed $6.97 per share to $28.57 in trading Thursday. McKesson expects $100 million in annual savings in the fourth year after closing.

Kobin said PSS World Medical had been discussing the possible sale of its skilled nursing business since May, with several potential buyers. That division of PSS is included in the McKesson sale.

The Associated Press contributed to this report.

drew.dixon@jacksonville.com, (904) 359-4098